Strategy of oil Refining Company

STRATEGY OF OIL REFINING COMPANY
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Executive summary
BP Global is one of the leading companies in the oil and gas industry, with a coverage that sons some 80 countries across the globe. Having started off in year 1908, under the guidance of William D’Rrcy, the company has made to the top of the industry among the industry giants. The company offers quite a number of products and services among them, acetyls, motor oil, lubricants and gas stations. It also sells these products and services using different brand names across different nations. BP connect, BP express, Burmah Castrol, Arco, AM/PM, BP Travel center, Wild Bean Café and AMOCO are among the main brand names that thrive under the umbrella company. In light of the company experiences with disasters along the Gulf of Mexico and the explosion in Texas refinery, the company has been struggling with stakeholders relative to bad press. This paper evaluates the company’s current position and future strategies using various tools, among them, SWOT analysis, TOWS analysis, PESTEL analysis, VRIO analysis, five forces by porter, STAKEHOLDERS Analysis and MAPPING. The paper then delves into the current challenge and recommendations for the future sustainability of the company.[. Bp.com, 'BP at a glance | About BP | BP Global', in Bp.com, , 2015, [accessed 7 May 2015].] [. F Alam, 'Global Business Strategy of British Petroleum (BP)', in Slideshare.net, , 2013, [accessed 7 May 2015].]
Company profile
BP is one of the largest companies in the oil and gas industry. Operating in more than 80 countries, the company has made giant leaps in the industry since its first discoveries in the 1908 along a rugged part within Persia. It was due to the dedication and genius of William D’Arcy that the company found it footing and fast on a trend that has seen the company claim the title among the largest oil and gas companies in the globe. Today the company boasts of a wide array of products and services that are offered to billions of clients across the globe with an immeasurable impact to the global economies. The company has a lot of products which it has developed over the years. Some of the products are only available in certain countries relative to the market demand needs. Of the many products, among the most common ones include; motor oil, lubricants, gas, acetyls, asphalt, bitumen, coke, crudes, industrial lubricants, petrochemicals, biofuels, wind power, liquefied natural gas and marine fuels among others.[Stefano, 'BP/ampm gas stations, your gas stations', in Slideshare.net, , 2007, [accessed 7 May 2015].] [. Bp.com, 'BP at a glance | About BP | BP Global', in Bp.com, , 2015, [accessed 7 May 2015].]
Among the many services that the company is involved with are, shipping, gas trading, power generation, exploration and gas stations which are the main services offered by the company. The company is largely involved in the industry market, specifically in the oil and gas markets. In the recent times the company has also ventured in the clean energy markets, with solar panels and wind energy installation across several nations. With a presence that spreads across more than 80 nations in the world, the company has a wide market, which has diverse needs. Most of the developed nations however have more demanding policies for clean energy, which is why the company has been experimenting with solar and wind energy. Currently the company boasts of more than 84000 employees spread across the many markets that the company has managed to venture into. The company largely operates in the market using several main branches to gain its reach in the industry, these include BP connect, BP express, Burmah Castrol, Arco, AM/PM, BP Travel center and AMOCO.['Strategy Safari: A Guided Tour through The Wilds of Strategic Management', in Work Study, vol. 48, 1999.] [. D hasani, 'British Petroleum (BP)', in prezi.com, , 2013, [accessed 7 May 2015].]
The industry has seen some major increase in the level demand relative to the possible supply that is currently possible to achieve. These two elements are the main drivers of the oil prices in the industry, other elements such geopolitics notwithstanding. In the month of March the oil prices eased, as the level of supply increased from the Middle East among the OPEC producers. It is estimated that the industry is going to be experiencing some sharp increase in demand to an average of 94.67 million barrels per day. The supply on the other hand is expected to be around 94.55 million barrels per day. This means that there is an estimated deficit in the amount of oil and gas that can be supplied to the market relative to the amount of demand. The company, on the other hand only the capacity to supply an estimated 3.2 million barrels per day, which means that they cannot even come close to meeting the demand in the market despite their reach in the market.[T Peters & R Waterman, In search of excellence, in , New York, Harper Collins, 2006.]
SWOT analysis
Strengths
* The company has a number of brands that t relies on for the diversity of products and services from BP connect, BP express, Burmah Castrol, Arco, AM/PM, BP Travel center and AMOCO. As such the company has a number of revenue streams to channel through diversity, instead of relying on energy alone.
* In the recent past the company management has worked really hard to make sure that they rebuild the reputation of the company, through transparency, corporate social responsibility ventures and considerate communication practices.
* The company also prides in the fact that the BP Amoco is one of the strongest brands in the oil and gas industry.[. F Alam, 'Global Business Strategy of British Petroleum (BP)', in Slideshare.net, , 2013, [accessed 7 May 2015].]
* The company also adopted a slogan that indicates it ventures in other markets other than oil. The slogan that reads, "Beyond Petroleum" works to make sure that the company products such as coffee are selling under it brand names.
* The company has also been making efforts to venture in the wind, solar and bio fuel energy as diversity from its main petroleum products.
Weaknesses
* One of the main weaknesses that the company has to battle with in the recent past and one that greatly damaged the company’s reputation is the series of oil spills disasters.
* In the recent past, there has been a lot of pressure on the company to provide clean energy solutions, relative to the various policy formulation pointed towards climatic changes and the impacts of fossil fuels and products in the environment.
* The competition has been taking advantage of the various calamities that have befallen the company to make political and economic mileage.[. idastilling, 'BP PR Strategy Brief', in Slideshare.net, , 2012, [accessed 7 May 2015].]
* Relative to the oils spills that have taken place in various parts of the world, the company has had to lay off most of its employees after closing down some of the affected wells. This has further dented the company image across the globe while building on the reputation of the competition.
Opportunities
* As the demand for energy increases the prices are bound to keep growing, especially in the emerging markets such as china and India.
* In the northern America market, the demand for natural gas is constantly increasing and this gives the company a chance to establish it dominance in the market.
* Using the alternative energy options, the company will be able to tap into other markets other than the petroleum markets and establish economic dominance.
* In light of the alternative energy sources, the company can take part in research, towards development of cleaner energy sources which would really increase its reputation levels and provide a chance to invest in the projects that would stream in more revenue.
* Using the many brands that the company enjoys, the management can focus on the subsidiary products to rejuvenate demand in their areas and diversify revenue generation.
* China and India are the fastest growing emerging markets, and the company stands a great chance of investing in these markets ahead of time to increase its chances of establishing in the market.[. F Alam, 'Global Business Strategy of British Petroleum (BP)', in Slideshare.net, , 2013, [accessed 7 May 2015].]
Threats
* Instability in the Middle East and unstable governance relative to terror groups and militia has threatened the oil production.
* Environmental policies have increasingly choked the oil industry, as more companies are forced to adopt environmental friendly practices.
* Governments are constantly changing engagement policies and choking the oil industry
* The level of competition in the industry is increasingly becoming stiff especially with new entrants in the market and introduction of cleaner energy sources such as solar, biofuels, hydrogen cells and electric powered vehicles.
* The company has in the recent past faced quite a number of lawsuits a trend that is likely to persist if the company does not address the concerns especially in reference to pollution, occupation safety, oil leaks, oil spills, refinery explosions and pipeline corrosion among others.
* The industry is highly volatile and makes it extremely risky to invest in the market. The company is forced to spend more, to make sure that it can stay in the market and maintain it hold relative to the stiff competition.
* Any fall in production within the industry means that the demand levels are heightened to a great level. This means that the prices of the products also go higher and the customers are dissatisfied and unwilling to buy.
* Natural disasters such as floods, hurricanes and earthquakes increase the chance of disruption of operations and destruction of property, which is quite expensive for the company.
* The badly damaged reputation continues to wreak havoc on the company endeavors to make up for the lost glory. Most of the competitions are constantly capitalizing on the company’s failures.
* Economic turbulence relative to meltdowns such as the one witnessed in 2008, hamper the rate of growth of the company and the level of sales made by the company.
FIVE FORCES ANALYSIS
Threats of substitute products
In the recent past, the oil products have faced stiff competition from the development of alternative energy products. Coal, solar, hydroelectric power, and nuclear power have been the alternative sources of energy that have threatened the oil industry traditionally. Today’s there are new alternative sources of energy, with development in the biofuels industry electric cars and hydrogen cells have redefined the threat. More manufacturers are trying out with electric energy especially in the auto mobile industry, where environmental policies have been redefined to embrace cleaner production and racing cars. The level of efficiency is quite high that that of gas. Hybrid cars are now more common than a decade ago. This means that cars will use less fuel as they will substitute the energy use with electric energy. More car manufacturers are also embracing fuel efficiency and thus shunning away from cars that are not fuel efficient. The alternative are quite expensive but are bound to set the pace in the future. Relative to the fact that the market is largely defined by the environmental policies, the alternative sources of energy are set to put immense pressure on the petroleum energy. Most countries have also adopted higher taxes for inefficient cars, while tax subsidies are welcome for the economical cars, equipment and machinery.[Stefano, 'BP/ampm gas stations, your gas stations', in Slideshare.net, , 2007, [accessed 7 May 2015].] [M Porter, Competitive strategy, in , New York, Free Press, 1980.] [. idastilling, 'BP PR Strategy Brief', in Slideshare.net, , 2012, [accessed 7 May 2015].]
Threats of new entrants
The energy industry is one that requires the investors to part immense sums of money as part of the capital. This is basically related to the fact that, entering the industry is associated with hefty taxes and registration sums. In addition to the licensing, exploration and establishment sums required are quite hectic for small firms. As such, most of the established players in the industry control companies that are entering the market and those that have to leave. Due to the fact that most of the markets are controlled through monopoly, it is tough for new entrants to gain access to the market. Aspects such as brand equity, economies of scale, access to distribution channels and governments regulatory policies are largely influenced by the key players in the market and most of the time these elements are manipulated to make harder for new entrants to join the market. However, there is a threat posed by the new entrants introducing the renewable energy solutions to the market. This is a relatively new market segment that is more appealing to the customers than the traditional ones such as fossil fuels. The government policies are also favorable to all the players that wish to join the market and introduce the renewable energy products. Most of the key players in the industry have also not had a chance to develop monopoly in the segment and thus cannot block new entrants from joining the market. As such, new entrants in the renewable energy sector pose a great threat to the status quo that has been maintained in the energy sector for quite some time, forcing the traditional market players to reconsider their future options. In light of this shift in the market, BP has sort to introduce cleaner energy solutions as a way of surviving the market dynamics and the strict environmental policies and scrutiny.[idastilling, 'BP PR Strategy Brief', in Slideshare.net, , 2012, [accessed 7 May 2015].] [M Porter, Competitive strategy, in , New York, Free Press, 1980.]
Intense rivalry among existing companies
In light of the various catastrophic events that have dented the company’s image, most of the competitors have taken the advantage to make political and economic mileage. Oil spills, wells’ closure, workers retrenchments, law suits and bad press, the company has been put under immense pressure to redeem it company image among the competitors delight. Companies such as Conoco Philips, Shell, Chevron and Exxon Mobil are some of the main competitors in the market. Even without the consideration of the mishaps that have characterized the last several years of BP, there is stiff competition between the top industry players. The industry is characterized with slow growth rates, high exit barriers and highly fixed costs with lowly differentiated products. As such, the players are locked in tightly controlled competition pool.[W Kim & R Mauborgne, Blue ocean strategy, in , Boston, Mass., Harvard Business School Press, 2005.]
The bargaining powers of the suppliers
Suppliers in the oil and energy industry are very, as suppliers can easily shift between companies. The products that the suppliers bring to the companies are characterized by high demand and low supply capability. This means that the suppliers have a strong sense of security and the ability to control the market. Suppliers in the middles east from the OPEC group have the ability to dictate the prices constantly; these include countries such as Saudi Arabia and Iran. For BP it is crucial that there production systems are able to achieve economies of scale or otherwise reduce their profit margin or make losses, relative to the turbulence in the industry.[M Porter, Competitive strategy, in , New York, Free Press, 1980.]
Bargaining power of the buyers
This is an industry that is highly sensitive to the prices changes down to the cents. Any increase in oil prices from the suppliers is highly criticized by the buyers. Pump prices are constantly analyzed for changes, as buyers look for the best prices for their money. The cost of shifting for the buyers is quite low giving them a high bargaining power over the companies in the industry. Brand loyalty in the industry is quite low and is dependent on the prices, as buyers turn away to the cheaper products at the slightest price chan...