1. Int Introd roduct uction ion:: In *++,-.//*0 the stru'ture o( the in#ustry has 'han%e# #ra"ati'ally with the e"er%en'e o( a wave o( "er%er a'tivity1 a'tivity1 Set at the en# o( .//*0 BP 'hie( e&e'utive0 Lor# 2ohn Browne0 loo)s to the (uture o( the 'o"any1 BP went "er%er a'tivity in *++,0 with its 'o"bination with A"o'o1 Other "a3or oil 'on'erns 4ui')ly (ollowe# suit1 Several lar%e an# #o"inant 5r"s0 5r"s0 'alle# 'alle# 6suer"a 6suer"a3ors 3ors70 70 searate# searate# (ro" the other 'o"etitors1 'o"etitors1 Desite Desite the lar%e lar%e nu"ber o( in#een#ent 5r"s0 there are are also a se'ialty0 suer "a3or 5r"s #o not 'onsi#er the" #ire't 'o"etitors1 Key Person: Lor# Browne0 BP8s Grou 9hie( E&e'utive: 2ohn Bu'hanan 9$O o( BP
Re'overin% (ro" lar%e #ebt Wea) "ar)et outsi#e o( Euroe Less ustrea" invest"ent to rela'e ro#u'tion in lon% run Deen#ent on s"all no o( %as 5el#s Pro#u'in% "ore than it nee#s (or its oerations
Environ"ental Re%ulations Substitute Pro#u'ts Power o( OPE9 Over'aa'ity in "ature "ar)ets Suer"ar)ets %ainin% "ar)et share Euroean E'ono"i' woes 9o""o#iti?ation @ no bran# e4uity in Euroe Ti%ht oli%ooly0 oli%ooly0 "ature "ature "ar)et0 'utthroat 'o"etition
! s t re a "
$in#in% E&loration
0 | Pa%e
Develoin% An# E&tra'tin%
M i # s t re a "
Transorta T ransortation tion an# Tra#in%
Entry Threat LOW
Sulier Power MODERAT E
Rival ry HIGH
Buyer Power LOW
Substitute s MODERAT E
D o w n S t re a "
Manu(a'turin%
Mar)etin% an# Sales
Strategic Management
The upstream se'tor involves the ro'esses o( oil e&loration an# #rillin%1 E&loration o( oil is 'on#u'te# both on lan# an# on the 'ontinental shelves a'ross the worl#1 The downstream se'tor involves re5nin%0 transortin% an# "ar)etin% o( oil an# oil ro#u'ts1 A(ter the 'ru#e oil is e&tra'te# (ro" oil wells0 it is transorte# to the ro#u'tion units throu%h ielines0 train 'ars0 lar%e oil tru')s0 et'1 At the ro#u'tion unit0 it is ro'esse# an# re5ne# into #ierent ro#u'ts that in'lu#e li4ue5e# etroleu" %as =LPG>0 %asoline0 3et (uel0 )erosene0 "i##le #istillates in'lu#in% heatin% oil an# #iesel (uel0 resi#ual (uel oil an# ashalts1 Both the ustrea" an# #ownstrea" se'tors are sub3e't to strin%ent oeratin% 'riteria su'h as environ"ental an# sa(ety re%ulations0 an# ro#u't se'i5'ations Midstream @ E<'ient Bri#%es (ro" Pro#u'tion to Re5nin% To 'onne't the ro#u'tion lo'ations o( %as an# oil with the re5neries0 the hy#ro'arbons nee# to be transorte#1 This is #one via #ierent transort "e'hanis"s0 o(ten ielines1 Su'h ielines are hu%e ro3e'ts0 o(ten runnin% a'ross #ierent 'ountries an# o( hi%h e'ono"i' an# oliti'al relevan'e to these 'ountries1
3. Key Challenes
In'reasin% %overn"ent re%ulations: ti%hter e"ission stan#ar#s: re4uire"ent (or 'leaner burnin% %asoline an# rules (or un#er%roun# stora%e tan)s is havin% si%ni5'ant i"a't on #ownstrea" business1 Li"ite# 'aa'ities 'an be in'rease# by in'reasin% e&istin% re5neries0 e<'ien'y %ains an# otential ban on a##itive is in'reasin% 'osts1 In'lination towar#s sustainable ener%y sour'es is #e"an#in% te'hnolo%i'al a#van'es1 Cow0 BP is stru%%lin% to (or"ulate its strate%y base# uon the 'hallen%es it is (a'in%1
!. "olution e#aluation $hy did %P interate& =i> Hi%her #een#en'ies on oil suliers le# to ri'e u'tuations1 !strea" inte%ration hele# to 'ontrol 4uantity an# 4uality o( oil1 =ii> Avoi#an'e o( new entrants Sin'e the suly 'hain o( oil is 4uite 'o"le& an# re4uires bi% 'o"anies to be verti'ally inte%rate#0 it ta)es a %reat 5nan'ial eort to enter the "ar)et to 'o"ete o n a sa"e level1 =iii> In'rease o( ro5tability I"rove"ent o( 'oor#ination o( ustrea" =ro#u'tion> an# #ownstrea" =#i stribution> will lea# to syner%ies an# an in'rease o( ro5tability1 =iv> !strea" an# #ownstrea" inte%ration hele# to ta)e networ) a#vanta%e o( oil sulies an# #istribution 'hannel whi'h not only in'rease 'aital throu%h a'4uisitions0 but also in'rease revenue "ani(ol# ti"es1 Strate%y (or a bi%%er 5r" involves stri)in% a balan'e between the e&loitation o( e&istin% resour'es an# the #evelo"ent o( new ones1 Ris) asso'iate# with this business is %ettin% hi%her1 9onsi#erin% the li(e 'y'le o( the ro#u't an# in#ustry0 it is in "ature# sta%e1 So0 we will #ire'tly try to 5n# out )ey oints re4uire# (or strate%y (or"ulation throu%h balan'e# s'ore 'ar#1 1 | Pa%e
Strategic Management $inan'ialE M er%ers an# A'4uisitions has hele# BP to sustain0survive an# roser in the business but Cee#s to (o'us on oerational e<'ien'ies to re#u'e 'ost 1 9usto"er erse'tiveE De"an# (or sustainable ener%y sour'es is in'reasin%1
Strate%y
Internal Business ro'essesE Hi%her inertia #ue to itsF si?e
Learnin% an# GrowthE BP 'an % row i( it has ability to aly innovative te'h nolo% y1
Criteria
Ac'uisition()ased stratey
*e+nition
A%ree"ents a"on% 5r"s in By %rowin% its the sa"e in#ustry in'lu#in% e&istin% business suly a%ree"ents0 3oint with its ventures an# 'ross-li'ensin%own 5nan'es
,echnoloy
Internal( *i#estiture *i#ersi+cation rowth()ased )ased stratey)ased stratey stratey De'ision to Diversi(y Business into with#raw (ro" the relate# an# unrelate# in#ustry base# areas uon lower ro5tability
Te'hnolo%y 'an be a'4uire# Ti"e 'onsu"in% Cot Ali'able throu%h a'4uisitions (a'tor throu%h this route
Te'hnolo%y 'an be a'4uire# thou%h unrelate# #iversi5'ations Strin%ent tar%ets Cot Ali'able Dee o')ets 'an "ust be ta)en to e&ten# e'ono"ies o( re#u'e 'ost s'ale (urther Cot "u'h In'rease# ro5ts Cot ali'able ee'tive throu%h this strate%y Woul# still be a Woul# still be a 9an hel in 'ororate hin#ran'e hin#ran'e %overnan'e
etwors and Global resen'e will be bene5'ial "upply chain
2 | Pa%e
Strategic Management
8. -ecommendation =i>
=ii> =iii>
Diversi5'ation base# Strate%y It 'an ot this strate%y to ta)e levera%e o( its hu"an resour'es an# %lobal suly 'hain an# 'an #iversi(y its business into relate# li)e Tra#in% other %oo#s0 Transortations0 Resear'h an# Develo"ent an# #iversi(y into Alternative sour'es o( ener%y #ue to its #ee o')ets1 Divestiture Strate%y 'an be 'hosen to "aintain its #ee o')ets1 Internal Growth Strate%y $o'us uon oerational e<'ien'ies an# stren%then its 'ore ro'esses an# invest in te'hnolo%y to "aintain its runnin% business1
