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As a process, strategic management focuses on an organization’s planning and policy development with the purpose of achieving specifically stated objectives, allocation of resources (Raduan et al. 406). Strategic management mainly deals with such aspects as the development of strategy, planning and implementation. Moreover, strategic management evaluates and adjusts its plans and policies based on their success level. This paper discusses strategic decisions and responses of British Petroleum (BP) to a major accident known as Deepwater Horizon oil spill.
British Petroleum is a public limited company recognized as one of the largest oil and gas corporations. The accident referred to as Deepwater Horizon oil spill occurred on the 20th of April of 2010 at a BP oil rig called Deepwater Horizon that was situated in the Gulf of Mexico (Deepwater Horizon accident and response par. 1). The accident happened because of the release of gas and the following explosion that led to the death of 11 workers and destruction of the rig.
Deepwater Horizon sank and this resulted in the leakage of oil into the Gulf of Mexico. This accident was accompanied by a variety of errors and failures such as the loss of hydrostatic control over the oil flow within the well, the failure to seal the well which made possible the ignition of the leaking hydrocarbons. The oil spill was massive and caused a dramatic damage to the environment.
Prior to the Accident
As showed by the investigation that followed the oil spill, the explosion happened because natural gas destroyed the concrete core set to seal the oil well, clearly the materials composing the core were not strong enough to prevent the gas from blasting through. Another accident of similar type occurred at another BP’s rig in 2008, the cause was the same – weak sealing concrete core (Pallardy par. 2). BP leaders characterized this accident as integrity failure, and in their report admitted that they missed a number of warning signs before the explosion at the rig, yet they emphasized that the other companies involved in the work of the well (Halliburton and Transocean) are more at fault.
The tragedy could have been avoided if only the managers addressed the signs of upcoming core breach such as unusual pressure results of pressure test (Goldenberg par 3.) At the same time, Halliburton and Transocean pointed out that BP failed to report some of its other mistakes such as flawed design of the well and insufficiency of safety procedures (Goldenberg par. 6). This way, the key factors underlying the disaster at Deepwater Horizon rig can be characterized as the company’s focus on profit-maximization and competition – based as well as resource – based theories (Raduan et al. 406). In other words, the BP leaders were driven by the belief that a company’s competitive advantage comes from their access to resources. To maximize their revenues and resources they targeted the increased acquisition of resources disregarding safety procedures for the sake of efficiency.
After the Accident
The damage caused by Deepwater Horizon disaster affected the environment, the lives of rig employees and the financial performance of British Petroleum. After the explosion the company has lost a lot of income due to the downfall of their shared at the London Stock Exchange. In June BP’s performance showed the lowest results since 14 years, and in the beginning of July the company has lost half of its market capitalization (Mejri and De Wolf 68). It is needless to mention that the reputation of British Petroleum has suffered similar damage as its products were boycotted and it was attacked by multiple environmental organizations.
According to three-phase crisis management model, BP was supposed to address the possibility of a crisis at the Pre-Crisis stage – eliminate the risks potentially leading to a disaster, establish strict rules and procedures of safety, ensure that they are followed carefully and all the time. Since BP failed it this stage, they faced the Response phase were a company was required to address the negative outcomes. As a crisis response BP immediately provided financial support to the families of workers killed and injured by the accident, and to all the legitimate victims of the oil spill (Barrett 1-2). Besides, the organization reacted to the environment pollution and established facilities helping to clean up the oil and to help the nature and tourism of the affected region recover from the disaster.
Around 48 thousand of people and 65 hundred vessels were mobilized to address the consequences of the spill (Deepwater Horizon accident and response par. 8). The company leaders’ and the public perspectives on the outcomes of the tragedy do not match. The managers of BP state that the size of payouts is huge and that the money often goes to people who were not affected by the spill. At the same time, the public insists that the payouts are insufficient compared to the level of damage caused by the disaster. BP is also accused of an attempt to shift the public attention from its fault as a part of legal strategy. Besides, the series of job slashes in the UK following the company’s need to cutback served as massive source of public dissatisfaction.
Finally, British Petroleum was frequently accused of providing false numbers in their reports concerning the level of damage in the Gulf of Mexico and of an attempt to assure the public that the environment is recovering and the damage is not as big in order to restore the brand image.
Deepwater Horizon oil spill was definitely a dramatic reminder that BP is in a dangerous business with a lot of risks in the spheres of planning, assessment and operations. The lessons learnt by the company after the disaster emphasized the importance of Pre-crisis phase and safety procedures namely. One of the integrity errors of the company was its self-promotion as environmentally conscious brand, even their label is made in green and yellow. The clash of the external image and the actual practices led to negative perception after the disaster. In the future the company will have to ensure that its environmental awareness and operations are in tune, that their planning does not focus on income disregarding safety and thoroughness of the workflow.
To conclude, BP’s negative experience could have been viewed as a valuable lesson, yet the amount of damage caused by the spill cannot be justified. Overall, the oil and gas giant neglected the safety procedures and thus exposed to extreme risk thousands of people and animals, polluted the Gulf of Mexico and the coastline. Even now, five years after the disaster, the area continues to suffer from environmental problems.
Barrett, Paul. M. BP’s Robert Dudley on the Gulf Oil Spill’s Legal Aftermath. 2013. Web.
Deepwater Horizon accident and response. BP. 2015. Web.
Goldenberg, Susanne. Management Theories and The Linkage With Organizational Competitive Advantage. Web.
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Mejri, Mohamed, and Daniel De Wolf. “Crisis Management: Lessons Learnt From The BP Deepwater Horizon Spill Oil.” BMS 4.2 (2013): 67-90. Print.
Pallardy, Richard. Deepwater Horizon oil spill of 2010. 2015. Web.
Raduan, C. R., Jegak, U., Haslinda, A., Amilin, I. I. “Management, Strategic Management Theories and The Linkage With Organizational Competitive Advantage From The Resource-Based View.” European Journal of Social Sciences 11.3 (2009): 402-417. Print.