The Key Strategy and Operational Issues
BP’s key strategy during the oil spill was to repair the company’s image through a compensation fund and ecological damage mitigation. In the aftermath of the accident, investigations revealed wide-ranging operational issues that precipitated the disaster. BP mainly focused on timelines and cost considerations in making decisions at the expense of safety. The staff opted for the “long string casing” for the well, a choice that was not foolproof (Harlow, Brantley & Harlow 2011, p. 81).
The other operational issues apparent in this case included the use of fewer centralisers in the shaft, cancellation of the “cement bond log” to cut costs and time lags, lack of synergy among stakeholders, and wilful disabling of warning devices (Harlow, Brantley & Harlow 2011, p. 81). The flawed operational decisions compromised the safety of the rig and affected BP’s image of commitment to environmental protection.
BP’s Strategy before the Accident Occurred
Prior to the accident, BP pursued a differentiation strategy built on an image of an environmentally committed firm. As Dudley explains, BP adopted the ‘beyond petroleum’ slogan and invested $8 million in solar projects to build a unique image in the oil industry (Barrett 2013). As a big firm, BP had the requisite resources to handle potential industrial accidents. Porter’s five forces analysis reveals that suppliers, competitors, and buyers shaped its strategy. BP’s suppliers included the government, Hyundai (equipment provider), and Transocean (drilling rig) (Harlow, Brantley & Harlow 2011). These suppliers offer inimitable products to BP, which raises the switching costs.
BP receives intense rivalry from other firms, e.g., Shell. Therefore, price competition is high because the products sold are comparable. Buyer power is significant in the oil industry because buyers are not many. Moreover, they can switch between oil firms. Therefore, BP’s environmental strategy prior to the accident was intended to differentiate the company from rivals selling nearly identical products.
Implications of BP’s Post-accident Strategy in terms of Public Perception
BP’s post-crisis management strategy sought to repair its perception in the eyes of the media, investors, citizens, and environmentalists. Public pressure forced BP to set up a “$20bn repair fund” to compensate those affected. Furthermore, Dudley reveals that BP had to divest up to $40bn of its assets in other locations after the accident. Thus, the public perception had a significant impact on BP’s performance.
The firm employed diverse approaches to repair its reputation. The strategies included media campaigns featuring apologetic ads by its CEO, print adverts in leading local newspapers, and social media campaigns to inform the public about the cleanup progress. The CEO also held talks with investors in the Middle East to restore their confidence in BP and avoid the possibility of a takeover (Harlow, Brantley & Harlow 2011). Other additional strategies employed to repair BP’s reputation included launching a $20bn claims kitty and a $52m grant to support outreach health interventions.
BP’s Ability to Balance between its Interests and Wider Needs and Expectations
BP adopted restoration strategies in the wake of mounting public criticism to protect its interests and meet wider needs. Specifically, the firm focused on two strategies, rectifying the problem and paying compensation to the affected people (Harlow, Brantley & Harlow 2011). In this way, BP could redeem its reputation and satisfy public needs and expectations without shifting the responsibility to its partner, Transocean.
In this regard, BP’s CSR record served as an insurance policy during this accident (Harlow, Brantley & Harlow 2011). Furthermore, its established image as an environmentally committed firm compounded the stakeholder’s expectations after the accident.
Besides brand equity and assets (internal resources), BP relied on its external strategic alliances with multiple stakeholders to satisfy competing interests. The environmentalists, government, victims, media, and investors had an interest in this matter. BP set up a settlement scheme supervised by Ken Feinberg, a health care grant, a public relations campaign, and crisis talks with the Middle East investors. BP could incorporate the lessons learned from this disaster into its future decisions through the establishment of a contingency plan to ensure staff safety and stakeholder collaboration to restore trust.
References
Barrett, P 2013, BP’s Robert Dudley on the Gulf Oil Spill’s Legal Aftermath. Web.
Harlow, W, Brantley, B & Harlow, R 2011, ‘BP Initial Image Repair Strategies after the Deepwater Horizon Spill’, Public Relations Review, vol. 37, no. 1, pp. 80-83.