Thursday, October 18, 2012

BP's Marketing Strategy in Changing Business Environment

Multinational corporations operating in complex and distinct political, economic, social and cultural environments need to improve, transform and develop their promotion strategies on a normal basis (Bamberg, 2009:46). Changing environmental factors create new problems for their operating, which often need considerable and serious changes in strategic decision-making and positioning of companies. Inflexible and rigid companies will cease to become competitive during the market every time changes occur (Fight, 2006:85). The aim in the provide report is to identify the past and supply changes in advertising strategy of British Petroleum, which have occurred under the pressure of environmental factors. It is evaluated whether these changes had been necessary, and future strategic alternatives for British Petroleum are recommended.

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2. Background


British Petroleum (BP) is often a multi-national gas and oil business located during the United Kingdom. Taking into consideration the size of revenues, BP proves to become the third largest energy business inside the world. It's reported that its revenue was equal to as much as $308 billion in 2010 (BP, 2010:18). Working from the field on the gas and oil industry, the corporation carries out a wide range of operations, namely exploration, refining, production, trading, power generation, renewable energy production, etc. BP is presented in more than 80 countries all more than the world and employs over 80,000 workers. The business was founded in 1909 as the Anglo-Persian Oil Company, but only in 1954, it was named the British Petroleum Company. 1998 was marked by the merger with Amoco (BP, 2011:1). Operating in turbulent and dynamic industrial sector, BP has always had to adequately react to the environmental changes and transform their advertising and marketing strategy (Bamberg, 2009:49).

3. BP in Dynamic and Changing Environment


Taking into account that this report analyses strategic positioning of BP as a response to environmental changes and influences, the external environment with the business needs to be carefully scanned. It is crucial to note that not just contemporary external influences should be investigated, but also the environmental causes that utilized to influence BP some time ago. This will allow for observing changes from a historical perspective. In this sense, the PESTEL framework seems being a incredibly fascinating tool. It's argued that "the PESTEL framework helps to identify the relative value of political, economic, social, technological, environmental and legal influences, and can be utilized to identify the key long-term drivers of change" (Fight, 2006:44).


It may be critically said that "recent marketplace events have provided a sharp reminder with the central role of energy for our near-term security; insecurity arises from a amount of issues, such as geopolitical instability, natural disasters, terrorism and even poor regulatory design" (ORCD, 2003:421). Indeed, geopolitical instability proves to be a strong political factor, which can influence volatility inside the energy markets. It is reported how the globe is heavily dependent on Middle East simply because this nation has more than 60% with the world's oil reserves (Thomas White Global Investing, 2010:1). The key oil making nations are Saudi Arabia, Iran, Iraq, Kuwait, UAE, Venezuela, Russia and Libya. Oil reserves of these nations are demonstrated in the graph below. It is valid to argue that numerous instability 'symptoms' had been witnessed in these nations recently, for instance military conflicts, authoritarian political regimes, corruption, etc. For instance, Venezuela tends to use its oil revenues to finance governmental programmes and ideology (Thomas White Global Investing, 2010:1).


As it can be witnessed during the histogram, Saudi Arabia has the largest oil reserves inside the world, namely 262.2 billion barrels. Canada, Iran and Iraq have 179.2 billion, 136.3 billion and 115 billion barrels respectively (Thomas White Global Investing, 2010:1).


In response towards the mentioned political influences, BP's strategy has been changed right here way. Generally, you possibly can observe a couple of main tendencies. First, British Petroleum attempts to hedge political risks inside oil producing nations by way of partnership and deals on the governments. For instance, BP signed a contract of the Russian state-run oil business Rosneft in 2009 (Hernandez, 2011:1). Second, the company evacuated its personnel from northern Africa because of growing political instability in Tunisia, Egypt and Libya. Simultaneously, BP develops its cooperation with emerging economies in Asia, that are more politically stable, namely India (Hernandez, 2011:1). These changes were necessary to be able to avoid political risks inside countries, which prove being the leading producers of oil.


Geopolitical instability within the globe and political tensions in these countries is also viewed as critical reasons that have led to the fluctuations in oil prices, which could be illustrated by the following graph.


As it can be grasped inside the graph, crude oil price reached its maximum in 2008 and constituted as much as $91.48 per barrel (IBP Oil, 2011:1). The period from 2002 to 2008 was marked by the gradual rise in crude oil prices. In 2009, the indicator was equal to $53.56, and oil prices began growing again (IBP Oil, 2011:1). It may be argued that fluctuations in crude oil costs are also the result of economic influences. It is obvious from the graph that crude oil prices skyrocketed simultaneously on the coming of the global financial crisis. One more enhance in oil costs occurred during the prolonged recession, from the long-term from the financial crisis (Bamberg, 2009:184; IBP Oil, 2011:1).

In accordance with Brigham and Ehrhardt (2010:901), the principal factors of fluctuations in crude oil costs are demand and supply forces, investment demand and monetary inflation. The us Dollar inflation is also graphically presented here way.


As it's observed, inflation reached its maximum in 2008 once the indicator was equal to 3.85% (Inflation Data, 2011:1). It has already been stated how the rapid growth of crude oil priced took place the exact same year. As argued by Brigham and Ehrhardt (2010:901), you may establish cause-effect relations among high inflation and also the growth of oil prices. Indeed, these environmental factors had economic influence on British Petroleum. The excessive dependence on non-renewable energy carriers and fluctuations in crude oil prices have contributed to the popularity of renewable energy, namely wind, solar and geothermal (Fight, 2006:93). The issue is how the reserves of renewable energy aren't limited.


In response to these economic influences, BP reconsidered its organization strategy the following way. It's reported that the business started making solar panels right after the acquisitions of Lucas Energy Systems (1980) and Amoco (1998). At the provide moment, the company proves to be the largest manufacturer of solar panels inside the world. BP has launched a couple of main kinds of solar energy products, namely products for person buyers and solutions for organisations. For instance, the business is planning to run a brand new solar energy project aimed at energy provide for Wal-Mart stores (BP, 2011:1). Furthermore, it is reported that BP invested more than $6 billion in wind and biofuel energy projects during the period from 2005 to 2010 (BP, 2010:61). These changes were necessary mainly because the PB attempted to attract clients by cheaper and 'green' energy. The volumes of 'green' energy production by BP is also presented by the following graph.


It is illustrated by the histogram that BP produced as much as 774 megawatts in 2010. The total volume of wind energy created by the company is more than the volume of solar energy (BP, 2010:63). However, the company tends to produce more solar energy each following year. If 162 megawatts have been created in 2008, the indicator increased towards the level of 325 megawatts in 2010 (BP, 2010:63).


Global energy consumption patterns might be viewed as an critical social influence on BP. The following histogram illustrates the changes in energy consumption during the last a couple of decades. It really is seen how the world's population consumed as much as 8,131 million tons in oil equivalent in 1990. However, the indicator constituted 11,808 million tons in 2010 (BP, 2011:1).


However, it should be taken into consideration that energy just isn't consumed equally by several regions with the globe (BP, 2011:1). The following graph illustrates energy consumption patterns by economic zones, unions and countries. As it can be understood, this social influence could bring about changes in marketing strategy of BP.


It is reported that almost 20% with the world energy is consumed in the US market. Being additional specific, the indicator was equal to 89,021 kWh/hab in 1990 and decreased to the level of 87,216 kWh/hab in 2008 (BP, 2011:1). It can be witnessed how the EU nations consume half the quantity of energy applied inside the US; it constitutes 40,812 kWh/hab. It's interesting to note that the EU consumption patterns had grown by 2008. Furthermore, it must be emphasised that such regions as Middle East and China have experienced enormous growth of energy consumption recently (BP, 2011:1).


In response to these socials changes, BP has reconsidered and changed its strategy the following way. The company employed to operate from the US industry quite actively and have large manufacturing facilities in this region during the 1990s. It is understandable how the country eating nearly 20% from the world energy will be of strategic interest for British Petroleum (Bamberg, 2009:142). Nevertheless, the company attempted to move significant part of its manufacturing facilities inside the US to China during the 2000s. For instance, BP's factories in Frederick, Maryland had been closed in 2000 (Wenying, 2004:100). Moving production facilities to China continued regardless of the reality how the Chinese government issued several protectionist laws, which need than no less than 85% of input materials need to be manufactured in China (Bamberg, 2009:83). These changes have been necessary due to the fact energy consumption patterns during the US marketplace had reduced by 2008.


It can be argued that technological progress is associated from the growth of energy consumption patterns by this sort of sectors as marketplace and transport. Here graph is also presented to illustrate this relationship.

All the four sectors have experienced growth in energy consumption recently. It is reported that in 2008, industry and transport used 27,273 TWh and 26,742 TWh respectively (BP, 2011). It can be stated by the reality that new technologies are much more energy consuming. Furthermore, rapid growth of the world's population techniques that much more and more oil needs to be spent on manufacturing of industrial solutions and transportation (Bamberg, 2009:42). For example, there were about 400 million motor cars in 2000; however, the total quantity of vehicles constitutes more than 750 million these days (Heitmann, 2009:167).


These technological changes have led on the right after reconsiderations and amendments in BP's strategy. First, the company started popularising efficient use of energy and invested in energy efficiency of industrial enterprises and engines for motor vehicles (BP, 2010:53). Second, BP introduces new technologies in their own production process. It was officially said by the Group Chief Executive that "the answer for the difficulties caused by some technology is a lot more and much better technology - to reduce the environmental impact of exploration, to reduce the carbon content from the fuels we use, to give individuals everywhere far better choices" (BP, 2001:1). To become a lot more specific, BP has rationalised transportation of oil and its items and has reduced the content of carbon in its fuel (Bamberg, 2009:142).


Being an energy company, BP is subjected to manifold environmental influences. It is possible to differentiate in between environmental causes that refer towards the global ecological changes and environmental influences provoked by the company itself. The latter are many chemical leaks, oil spills and dumping of hazardous substances. For instance, BP was blamed for dumping of chemical wasted in Alaska during the period from 1993 to 1995 (Roach, 2006:1). Prudhoe Bay oil spill, which occurred in August 2006, was the result of pipeline corrosion. More than 5,000 barrels of crude oil leaked and caused environmental damage for the sea life. Another trouble was registered in Texas City in 2010 after there was a chemical leak of hazardous things to the atmosphere (Aulds, 2010:1).


Regardless in the fact that BP runs a excellent quantity of 'green' practices and corporate social responsibilities (investment in renewable energy projects, restoration with the environment after oil accidents, funding of ecological projects and initiatives, etc.), the company was given the Greenwash Award in 2009 (Green Peace, 2010:24). The firm tends to manipulate the public paying significant attention to its CSR activities. It is argued that BP spends on 'green' practices less than it is proclaimed in official statements on the company (Green Peace, 2010:26). It really is summarised that BP attempted to produce sure public image by its 'green' practices in response to the stated environmental influences. However, these attempts cannot be classified as successful. These changes in strategy cannot be classified like a necessity. The business could had been far more open and trustworthy with the public, that can have made more positive public image.


Finally, it may be said that BP has already had a series of legal arguments from the governments and non-governmental organisations. It's reported that "yet already BP's actions are facing unprecedented scrutiny, thanks to a years-long history of legal and ethical violations that critics, judges and members of Congress say shows how the London-based company includes a penchant for putting profits previous to just about everything else" (Mauer and Tinsley, 2010:1). In response to these legal influences, the business has turn into more careful and prudent (Aulds, 2010:1).

4. Strategic Position of BP


Prior on the identification in the generic strategy of BP, it's necessary to conduct a stakeholder analysis and detect the recent changes in BP's attitude on the a variety of interest groups. The main stakeholders of the business are the government, the press, suppliers, ecological organisations, customers, alliance partners, shareholders, the public and employees (BP, 2010:34). The positioning of these interest groups inside stakeholder matrix can also be presented here way.


It could be observed that role in the governments has changed under the influence of political influences and geopolitical instability. The governments of oil creating countries and suppliers seem being really strong (BP, 2010:74). At the offer moment, BP has to generate strong long-term relationships with governments to be able to avoid political risks, limitations and possible restrictions (Thomas White Global Investing, 2010:1). It is argued that ecological organisations and buyers are much less powerful, but they have a tendency to demonstrate greater interest towards company. Ecological organisations and the public are worried about dangerous final results from the company's operations. Consumers are interested in BP because the energy consumption patterns are growing and there is always demand for oil (Bamberg, 2009:34). The business has numerous groups of customers, namely car owners using program stations (Aral, ARCO, BP Connect, BP Express and BP2go), users of convenience stores, users of solar panels, users of motor oils and derived products, the transport marketplace as well as the aerospace market (BP, 2010:74).

other significant alter that has happened recently is that employees' power has increased. This improve can also be stated by numerous accidents, disasters and safety problems, which have occurred at British Petroleum. For instance, it is stated by america Department of Labour (2011:1) that the explosion during the isomerisation unit from the BP refinery in Texas City led for the death of 15 workers and injury of 170 employees. Similar scandals attract the public attention and interest and stimulate better maintenance of safety standards and norms. It must be noted that the power in the press and the public has elevated too (Green Peace, 2010:21).


Discussing generic techniques in the company, it's also possible to identify changes. At the early stages of its development, BP was right after the cost leadership strategy (Bamberg, 2009:132). Indeed, the business made significant efforts to remain the leader in developing costs. Nevertheless, it is argued by Company & Leadership (2011:1) how the firm's price reduction practices had been the primary reason for oil spills and leaks. Cost cutting measures prevented the business from timely and regular repairs and maintenance in the infrastructure (Business & Leadership, 2011:1). BP has transformed the price leadership strategy to the differentiation strategy by the produce moment. It is argued that "the business has endeavoured to redefine its industry space by laying claim to activities beyond oil and gas for example option energy plus a lower carbon future" (Bright, 2011:4).


As it may be seen, the turbulent and changing external environment has forced BP to undertake a series of new decisions, which had been different from people undertaken during the past. These changes inside corporate advertising and marketing strategy is also evaluated like a regular reaction to external political, economic, social and technological influences. As being a result, you may observe the alter in stakeholders' power and interest for the company. Furthermore, BP's generic strategy has evolved from price leadership into differentiation (Business & Leadership, 2011:1; Bright, 2011:4).

5. Future Strategic Options


The discussion of future challenges for BP will reveal that future energy consumption patterns will continue growing. The forecast of future changes might be presented right here way.


The total volume of energy consumed by the globe will have constituted as much as 16,432 million tons in oil equivalent by 2030 (BP, 2011:1). One more essential challenge that must be taken into account is feasible growth and fluctuations of oil prices. The company need to avoid accidents, disasters and safety problems, which prove to be serious challenges to British Petroleum. Finally growing reputation and demand for renewable energy are each opportunity and challenge for the firm (Aulds, 2010:4).


Relying on the previously recognized environmental influences and pressures, it can be suggested that British Petroleum need to follow the diversification strategy as a future option. Based on Ansoff matrix, diversification could be the strategy, which means entering new markets with new products and solutions (Meldrum and McDonald, 2007:142).


This option of the future strategic selection can be mentioned by numerous reasons. First, growing geopolitical instability and political risks and oil producing countries have forced BP to entering new markets, which are characterised by substantial potential. Second, the company can continue running and developing renewable energy projects, which have become extremely well-liked (Hernandez, 2011:1). Within the problems of growing demand for energy, growing consumption patterns and increasing crude oil prices, the business ought to be additional active from the field of option energy.


A modified version of strategic alternatives was out there by Turner (2005:340).


As it's grasped in the improved framework, BP must follow the offensive strategy in future. It's implied that new services must be delivered to far more politically stable and balanced markets (Turner, 2005:340). It is expected that this selection on the future strategy is going to be consistent with modern day changes and tendencies within the industry, namely growing demand for renewable energy, unstable crude oil prices, ecological awareness and energy efficiency (Bamberg, 2009:153).

6. Conclusion and Recommendations


It may be concluded how the principal strategic changes undertaken by British Petroleum in response for the turbulent and dynamic environment are contracts on the governments to avoid political risks, moving to additional stable nations just like India from the northern Africa, acquisition on the solar panel manufacturers, investment in wind and solar projects, moving manufacturing facilities to China, investment in energy efficiency, reduction of carbon content in fuels, participation in 'green' activities an 'greenwashing'. The business had to alter its generic strategy from price leadership to differentiation because price reducing practices had led to oil spills and leaks. It can be summarised that the known changes were necessary. Nevertheless, the business could were far more honest and open in its CSR projects.


It is suggested that BP must use the diversification strategy as being a future strategic option so that you can continue responding towards environmental challenges. The business need to diversify its product or service number associated with the production of solar and wind energy for individual and corporate customers. It's expected that these solutions are going to be popular inside the emerging markets including India and China exactly where incomes aren't high, but energy consumption patterns are growing really fast. Furthermore, it's suggested that the company should improve expenditures on infrastructure maintenance and employee safety. Together with alternative energy production, this will positively influence corporate popularity following the recent safety scandals and 'greenwashing'. Finally, it is advised that BP need to continue popularising efficient use of energy by individual shoppers and industrial enterprises.

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