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British Petroleum Company: Reputation Rebuilding Report

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Updated: Oct 27th, 2020

Content Analysis

Background

BP has been known as the organisation that has been at the top of the oil and gas industry for quite a while. However, a recent string of scandals related to the environmental damage made by BP’s oil spills has prevented the company from progressing. However, instead of using the available financial assets to improve its reputation among the stakeholders and increase the dividends as the means of promoting corporate loyalty among the shareholders, BP’s leaders seem to have been focusing on catering to their own needs and disregarding the ones of its shareholders, customers, and the general audience. As a result, the firm has been facing a significant decline in its shares value. Therefore, it is desirable that BP should reconsider its current financial policy and introduce the principles of sustainability to maintain the

According to the recent records of the company’s progress in the target environment, BP has been doing comparatively good. However, the changes in the quality of its performance and the associated financial issues have caused the organisation to lose a significant amount of money (Ladd 2012). One must admit, though, that the results of a recent analysis of the organisation’s financial status will show that BP has been experiencing a rather shaky growth (see Fig. 1). As the diagram below shows, the company is not in its peak shape currently, yet it is clearly recovering from the 2008 failure that triggered a rapid and immense drop in the share price.

BP Share Price.
Figure 1. BP Share Price (2011-2016) (BP PLC 2016).

Furthermore, a recent analysis of the changes in the company’s share value will show that it has dropped by 0.85% ($2.75, i.e., to $456.10). Although the identified change might seem insignificant, it points to the fact that there is a propensity for the company to execute the strategy that does not contribute to a rapid growth in the target market. Moreover, it should be borne in mind that the actual earnings met the estimated ones only in the third quarter of 2016 (BP PLC 2016).

Opportunities and Risks

Despite the obvious issues with the use of resources and with the management of the company’s reputation, BP seems to have a very big potential in the global market. Given the fact that it has already established a strong presence in the environment of the oil and gas industry, it can focus on promoting changes to its quality standards and corporate ethics without fearing that its competitors will take its place. Furthermore, the fact that BP has expanded its services nearly across the globe shows that the organisation is capable of operating in the environment of the global economy and attracting customers from all over the world.

However, BP is also facing a range of risks that it will have to manage in order to maintain its position in the target market and create the environment in which the profit margins can be increased. The firm currently risks losing its reputation and, therefore, disappearing from the global market. Furthermore, BP risks losing the trust of its shareholders. Unless efficient measures for addressing the problems faced by the organisation are introduced, the risk of losing a significant amount of financial assets will become increasingly more tangible. Furthermore, despite the fact that the company has established a strong presence in the target market, it is reaching its maturity. Thus, BP will have to make sure that its competitive advantage remains high enough for other organisations to be unable to surpass it.

Stakeholders

Among the essential stakeholders, investors, customers, and the general audiences affected by the spills need to be mentioned. At present, it is crucial to pay close attention to attracting new customers and retaining the old ones, which can be accomplished with a promotion campaign. However, the company will have to rebrand its image so that it could not be viewed as a threat to the environment anymore.

Speaking of the company’s stakeholders, one must address the obvious problem regarding the dividend payments. Despite BP’s claims about its stellar dividend payment policy and the seemingly positive premises for developing relationships between the shareholders and the organisation, a recent report on the issue shows that a conflict between the organisation and its stakeholders may be brewing. Indeed, as Kent (2016) explains in her recent report, the current policy on dividend payment has raised a few eyebrows in the company and caused an impressively negative response among the shareholders: “Following the company’s annual meeting Thursday, the oil giant said 59% of the votes cast were against the company’s executive compensation decisions for 2015” (Kent 2016, par. 2). Therefore, there is an obvious concern about the allocation of the company’s financial resources, as well as the ethical aspect of the financial choices made by the organisation. Given the fact that the dividend rate has been reduced along with the rise in the benefits obtained by the company’s Chief Executive, there are reasons to assume that BP could use a more ethical policy as far as the allocation of its financial assets is concerned.

Particularly, the focus on the needs of all stakeholders involved, including the shareholders of the organisation, needs to be brought up. Given the recent drop in the firm’s popularity due to the effects that it has had on the environment, it does not need another publicity that will expose the selfishness of the choices made by the leaders of the organisation. In other words, the value system of the company needs a serious redesign.

BP’s Prospects

If the organisation manages to convince the target audience that it is time to give it a second chance, BP may become very powerful in the target market. Because of the inconsistency in its use of resources, the organisation has been failing both financially and from the marketing perspective.

Therefore, the prospects of the company are rather vague. Although there are the advantages that the company can use as the foundation for increasing its profit margins and benefitting financially, the firm needs to use its resources in a more elaborate manner. Particularly, it is essential for the organisation to reconsider the principles of corporate values and ethics. Unless the company starts focusing on its key stakeholders, it will ultimately fail to gain the competitive advantage that it needs to become successful in the identified environment.

Response

Issues Faced by BP

Apart from the obvious reputation concerns, the firm is bound to deal with a plethora of issues related to its future change toward the sustainability model. As explained above, the fact that the company’s strategy was geared primarily toward increasing profit margins as fast as possible with little to no concern for the expenses and resources. In addition, the fact that the company has been depriving its stakeholders of their revenues so that the leaders of the organisation could benefit extensively shows that BP may need to improve its current relationships with the target audience. For this purpose, the essential principles of the sustainable use of resources, as well as the concepts of honesty and transparency, must be introduced into the design of the company.

The low levels of dividend payment are especially disappointing for the shareholders in light of the fact that the organisation has been known for decades for its high dividend payments (Cherry & Sneirson 2011). However, after the crisis stroke and the organisation became infamous for the damage that it had caused to the environment, the amount of dividend payment shrunk significantly. On the one hand, the specified step taken by the company can be viewed as rather rational. Indeed, given the drop in the firm’s popularity, it is quite sensible to use the available resources to improve the firm’s reputation in the target market by carrying out a vast campaign. Seeing that the latter is likely to be very expensive, the reduction in the dividend rate can be considered a temporary and inevitable step. However, a closer look at the way in which the firm has been using its financial resources will reveal that little to no effort has been made to address the obvious concerns; instead, the profits received by the company leaders have increased (Griggs 2011).

In other words, along with the financial strategy used by the company, the set of values and ethical standards used as the foil for the decision-making processes in the organisation must be revisited. Unless the company leaders recognise the necessity to meet the requirements and satisfy the needs of all stakeholders involved, including the company’s shareholders, the chances for progress will remain very low. Furthermore, there is a threat that BP will lose even more money and will ultimately fail in the global market because of the lack of trust and the negative reviews that it will receive. Particularly, the use of financial audits can be considered as the means of improving the current state of affairs (Ma 2016).

Planning Model

Goal-based planning can be viewed as a possible tool for addressing the current problems. To be more accurate, the SOSTAC + 3M model needs to be considered as the foil for addressing the problems that BP is currently facing. For this purpose, the following elements need to be considered and assessed carefully: situation, objective, strategy, tactics, actions, and control. The situation that the company has found itself in is clearly deplorable. Because of the irrational financial policies of the organisation and the lack of sustainability in the choices made by the leaders, the firm’s shareholders are currently experiencing mistrust toward BP. The reasons for their unwillingness to build strong relationships with the company and its leaders are quite obvious; as stressed above, the dividend policy of the organisation is very suspicious.

Among the essential objectives that the firm needs to pursue currently, the necessity to regain the trust of its shareholders, at the same time increasing the share value, needs to be brought up. To attain the identified objective, the firm will have to consider altering its current set of values and put a heavier emphasis on the promotion of ethical standards and a set of better values. Specifically, BP must promote the idea of keeping all stakeholders satisfied, the company’s shareholders being one of them. The increase in the company’s share values should be viewed as another objective that needs to be accomplished so that the firm could regain its reputation in the target environment (Rotkin-Ellman, Wong, & Solomon, 2012).

Determining the strategy that will help BP attain the identified goal, one will have to mention a shift toward a framework of financial operations that implies higher transparency rates. Moreover, it is strongly recommended that the firm should update its ethical code so that the decision-making process should result in the choices that are beneficial for all stakeholders involved. For instance, the allocation of the financial resources should be reconsidered. Instead of using the spare amount of money to increase the profits of the company’s leaders, it will be more sensible to focus on improving the current crisis management framework. Furthermore, the creating the promotion campaign that will help improve BP’s image in the global market should be viewed as the next step to take. The steps listed above can be deemed as the tactic that the organisation should use in order to advance in the realm of the global economy and regain the trust of its stakeholders.

As far as the actions of BP are concerned, the organisation will have to consider creating the promotion campaign that will help attract the target audience and make it evident that the firm has changed its ethical framework and set of values. Prior to the design of the campaign, however, the financial resources of the firm will have to be reallocated so that the shareholders could receive the dividends that they expect the company to pay them. As soon as BP starts meeting its obligations and complying with the principles of stakeholder satisfaction, it is expected that the firm will face a rapid revival (Wolf & Mejri 2013).

However, changing the organisational strategies radically is not enough to make sure that the company leaders should not make the same mistake in the future. To avoid possible financial issues and facilitate a proper allocation of the company’s resources, as well as meet the needs of the shareholders, BP will have to include regular audits into the set of its control tools. The audits will help make the corporate financial policy entirely transparent, thus, preventing possible instances of an unfair use of the company’s financial assets. Furthermore, regular reports must be included into the set of control tools that will be used to maintain the transparency rates consistently high. Furthermore, the organisation should consider using a statistical analysis to make sure that the emerging problems should register on BP’s radar successfully.

It is expected that the model described above will create prerequisites for a successful management of the issues that BP has been facing over the past few years. However, for the strategy to work, one will have to consider the 3M (Men, Money, Minutes) factor as well. For instance, as far as human resources are concerned, it will be necessary to shift toward the framework that will help take the needs of all stakeholders into account. As stressed above, it is crucial to create the environment in which the financial assets are distributed in a fair and unbiased manner. Thus, trust-based relationships can be created between the company and its stakeholders, including shareholders.

Furthermore, the ethical principles by which the company’s decisions are guided needs to be improved so that the needs of the general audience (particularly, the significance of clean and unpolluted environment) should be appreciated. For this purpose, the budget of the organisation must be allocated in a sustainable way. Finally, the organisation will have to make an efficient use of the available time (i.e., “Minutes”). In other words, it will be necessary to make sure that the necessary changes should be applied within the next several weeks; otherwise, the recovery process is likely to take a significant amount of time and have little effect on the firm’s progress in the target market. Particularly, it will be necessary to capture the attention of the target audience, at the same time making sure that the shareholders of the organisation should receive the dividends that they expect (Johnston & Goggin 2015).

Crisis Management

Gonzalez-Herrero and Pratt’s tool can be considered as a possible model for introducing the company to rapid yet inevitable changes. The three-step framework will help simplify the process and adjust it to the specifics of the firm. Thus, the needs of the staff will be met. At the first stage of the process, the organisation will have to define the source of the crisis, including internal and external factors. For instance, the ethical principles according to which BP is run will have to be questioned. The second stage will require the design of a sustainable strategy.

Specifically, it will be necessary to create the set of values that will be used as the foundation for the decision-making processes. In addition, the strategy for the allocation of the financial resources must be built so that BP could have enough resources to support its stakeholders and at the same time build a large promotion campaign to attract customers. Finally, at the third stage, the company will have to apply appropriate measurement tools to control the product quality level, the rate of stakeholders’ satisfaction, and other factors that affect the company’s position in the global market. Furthermore, the financial processes carried out within the organisation must be scrutinised carefully so that no instances of an inadequate management of financial resources could occur (Sabet, Cam, & Heaney 2012).

Timeline

Presumably, it will take a year to make sure that the alterations to BP’s design should be viable in the context of the global economy. In order to make sure that the necessary tools and frameworks are integrated into the organisation’s system of values and strategies, it will be crucial to introduce the elements of control. The chart provided below can be used as the means of keeping track of the essential changes made to the company’s design. As a result, a consistent improvement in the company’s performance, a rapid improvement of its reputation, and the following economic growth can be expected.

Table 1. Action Plan: Timeline.

Month/Activity Values and Ethics Reconsideration Dividend Rate Increase Promotion Campaign Promotion of Active Communication
January X X
February X X X
March X
April X X
May X X
June X
July X X
August X
September
October
November X
December X

Reference List

2016, Web.

Cherry, MA & Sneirson, E 2011, ‘Beyond profit: rethinking corporate social responsibility and greenwashing after the BP oil disaster’, Tulane Law Review, vol. 85, no. 4, pp. 983-1038.

Griggs, JW 2011, ‘BP gulf of Mexico oil spill’, Energy Law Journal, vol. 32, no. 1, pp. 57-79.

Johnston, TS & Goggin, SN 2015, ‘Presidential confidence in crisis: blame, media, and the BP oil spill’, Presidential Studies Quarterly, vol. 45, no. 3, pp. 467-489.

Kent, S 2016, , Web.

Ladd, A E 2012, ‘Pandora’s well: hubris, deregulation, fossil fuels, and the BP oil disaster in the Gulf’, American Behavioral Scientist, vol. 56, no. 1, pp. 104–127.

Ma, M 2016, ‘Exploration decision-making on energy based on improved real option model and BP neural networks’, International Journal of Control and Automation, vol. 9, no. 10, pp. 393-402.

Rotkin-Ellman, M, Wong, KK, & Solomon, J 2012, ‘Seafood contamination after the BP gulf oil spill and risks to vulnerable populations: a critique of the FDA Risk assessment’, Environmental Health Perspectives, vol. 120, no. 2, pp. 157-61.

Sabet, SAH, Cam, MA, & Heaney, R 2012, ‘Share market reaction to the BP oil spill and the US government moratorium on exploration’, Australian Journal of Management, vol. 37, no. 1, pp. 61–76.

Wolf, DD & Mejri, M 2013, ‘Crisis communication failures: the BP case study’, International Journal of Advances in Management and Economics, vol. 2, no. 2, pp. 48-56.

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