Introduction
BP is a public limited company which is established within the United Kingdom major integrated oil and gas industry. The firm deals with production of various forms of energy such as transportation fuel and petrochemical products (Uldrich, 2010, p. 30). Currently, the firm is considered to be amongst the largest gas and oil producing companies.
Over the years it has been in operation, the firm has managed to establish its market in more than one hundred countries. The firm’s operations are organized into two main segments. These include refining and marketing and exploration and marketing. The two segments are well organized into upstream activities, field development and midstream activities.
Upstream activities entail exploration of gas and oil. On the other hand midstream activities entail transportation of petroleum and petroleum products through the firm’s pipeline network. Through its refining and marketing processes the firm is able to supply its products to the market.
Considering the competitive nature of the industry, it is vital for firm’s major integrated oil and gas industry, it is paramount for the firm’s management team to be effective in formulating operational strategy. One of the ways through which this can be achieved is by undertaking a SWOT analysis. This paper entails a comprehensive SWOT analysis of British Petroleum Company (BP).
SWOT analysis
According to Dransfield and Needham (2005, p.137), a SWOT analysis enables a firm to evaluate its internal strengths, internal weaknesses, external opportunities and threats. Below is a discussion of BP’s SWOT analysis.
Strengths
BP has a strong management team. As a result, the firm has developed an edge with regard to strategy formulation and implementation. Its strong management team has not only made the firm to attain a strong financial performance but have also made the firm to operate in a social responsible manner (BP, 2011, para. 1-3).
The firm has been in operation for a number of years and has managed to venture into the global market. As a result of its global operations, the firm has managed to develop a strong financial base arising from its large market share. BP has also developed strong brand equity globally. This has culminated into its products being widely accepted in the global market hence attaining a high degree of customer loyalty.
The firm has a strong research and development team which enables it to conduct successful oil and gas exploration. Its research and development is also enhanced by the firm’s collaboration with other firms such as California Institute of Technology. The collaboration has enabled the firm to be efficient in developing solar cells. In addition, the firm also collaborates with MIT in an effort to conduct a research regarding development of clean coal technology (Uldrich, 2010, p. 33).
Opportunities
Over the recent past, various economies have experienced oil scarcity. This has led to a rise in oil and gas prices which is an opportunity for the firm to make more profit. Considering the increasing demand for alternative sources of energy, there is a high probability of BP improving its profitability by venturing into production of alternative energy.
Some of the alternative energy sources which the firm should consider include bio-fuel, wind and solar energy. In addition, BP can expand its pipeline networks to emerging economies such as Eastern Europe countries and China. This will contribute towards an increment in the firm’s market share.
Considering the high rate of growth in the vehicle manufacturing industry, there is a high probability of the firm experiencing an upward shift in the demand for crude fuel. This arises from the fact that most of these vehicles will be fueled with crude oil energy.
Weaknesses
Oil and gas form’s the firm’s core products. However, these resources are finite which means that the resources are limited. In its operation, BP has been over-relying on hydrocarbons. As a result, the firm’s survival in the long term is threatened.
The firm has a weak pricing strategy with regard to some of its products. In its operation in the United States, the firm distributes different varieties of BP and Amoco fuels. Some of these include Amoco and BP fuels. These fuels have low sulfur content. However, the price of these fuels is relatively high.
Considering the fact that consumers are price sensitive in their purchasing patterns, there is a high probability of them considering cheap alternatives. This is mainly likely to occur during economic recession. The resultant effect is that the firm may lose its loyal customers to competing oil and gas products.
Threats
Considering the increased requirement for firm’s to attain environmental sustainability in an effort to minimize increment in the rate of global warming, many firms may result into consumption of alternative energy. Incorporation of renewable energy by firms is a threat to the firm’s hydrocarbon fuel business.
The firm’s facilities which are located in various parts of the world face numerous risks such as a result of political instability which may lead to war. In addition, the high rate of terrorism is a threat to the firm. This arises from the fact that such plants are a major target.
Due to the lucrative nature of the industry, there is a high probability of competitors developing future alternative fuels culminating into an increment in industry rivalry. The resultant effect will be a reduction in the firm’s level of profitability.
In an effort to expand into the international market, the firm faces increased cultural challenges due to existence of cross cultural differences. This may limit the firm from conducting its operations in the international market.
As a result of the oil spill which occurred off the Gulf of Mexico, the firm’s popularity has been negatively affected in some areas (Hefferman, 2010, para. 1). This may limit the firm’s effort to expand its operations to such markets. The previous economic recession has a negative effect on the firm’s operation. For example, increase in the price of oil barrel to $66.71 will result into tension amongst firm’s operating in the oil business (Hefferman, 2010, para. 5).
Conclusion and recommendation
From the analysis, it is evident that BP has developed a number of strengths internally culminating in the firm’s success. In addition, the external environment also presents numerous opportunities and threats. In an effort to position itself effectively in the market, BP’s management team should consider the following recommendations.
- Considering the rise in oil prices, the firm should consider implementing a flexible price policy. This will culminate into the firm attaining price competitiveness compared to its rivals.
- The firm should consider cooperating with its business partners so as to develop sustainable energy.
- In an effort to attain environmental sustainability, the firm should ensure that its operations do not result into emission of carbon dioxide which is one of the major causes of global warming. In order to achieve this, the firm’s management team should incorporate the concept of carbon-foot-printing which entails removal of carbon dioxide a firm emits in the atmosphere.
Reference List
BP. (2011). How we operate. Web.
Dransfield, R. & Needham, D. 92005). GCE as level applied business double award for OCR. New York: Heinemann.
Hefferman, M. (2010). BP oil spill: a company out of its depth. Web.
Uldrich, J. (2010). Green investing: a guide to making money through environment friendly stocks. New York: Adams Media.