Introduction
The company chosen for Analysis is BP (British Petroleum); a vertically integrated multinational firm, and one of the largest organizations in the globe. The company is in need of revamping the oil production process especially after the catastrophic 2010 oil spill and dwindling returns over the past five years.
Main consideration
The organization is vertically-integrated because it handles almost all aspects of oil production such as exploration, refining, marketing, electricity generation, distribution, and the sale of petrochemicals. While the company might boast about its large size and its capacity to handle all these aspects, its returns indicate that the firm might need to reinvent itself.
The notion of integration might not be the best model for the company. This is evident through minimal shareholder pay backs over the past five years. In this period, the company has recorded shareholder depreciation in its annual returns.
Shareholder pay outs do not come from capital growth; they instead emanate from dividends. As if this is not enough, the firm has not witnessed any substantial production growth over the past nine years, yet it keeps investing in its business processes.
Current situation of the company’s industry
Not all oil companies are doing as badly as BP. Firms that focus on one line of production, or those that are not as vertically integrated as BP, tend to perform well. An organization such as BG only dwells on upstream oil processes and leaves the marketing, distribution and trading to other partners.
This company has recorded high capital growth numbers. Conversely, large oil corporations that integrate production with sales are position 23 out of 24 among all other significant industries in the country.
This implies that profitability is quite low for integrated oil firms. Members of this industry must also contend with concerns about environmental protection. Many of them also have difficulties in acquisition of new resources.
In this light, the company needs to consider separating its brands and businesses. In other words, it can sell away declining brands and stick with the ones that have a long life such as shale gas or liquefied natural gas. It could rebrand upstream and downstream portfolios and thus concentrate on the aspects of production that truly yield effective returns.
Secondary data resources
An industry analysis will be necessary to start the research proposal. Cowan (2) wrote one such report concerning gasoline prices. This article highlights how refineries, marketers and distributors are performing. It will allow one to make an analysis regarding performance in the oil industry.
The second resource will be a Wall Street journal report by Power et al. (11) on the feasibility of drilling as part of the company portfolio. Lastly, the proposal will use a publication from BP concerning its performance in order to prove that it requires a restoration of the same (Tharoor 5).
Information gathering techniques
The research will mainly dwell on secondary data, and it will only use the most relevant and credible resources. This will entail a selection of reports and articles that discuss oil industry performance over the past five decades. Such papers must specifically relate to profitability within vertically integrated oil firms.
Additionally, the paper will involve an analysis of the growth numbers within BP itself so as to justify the need for a brand revamp. Thereafter, the research will give some suggestions on how the brand reinventions can occur.
Works Cited
Cowan, Trey. Crude Math: What is really impacting global gasoline demand. 2012. Web.
Power, Stephen, John Kelly and Stephen Hughes. “Lawmakers chastise oil firms over spill.” Wall Street Journal. 2010: 11. Web.
Tharoor, Ishaan. “A brief history of BP.” Time Magazine. 2010: 5. Print.