British Petroleum Strategic Management

 BP in Russia Case Analysis

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British Petroleum (BP), originally founded in 1909 as Anglo-Persian Oil Company (BP.com), is now the biggest company currently in the United Kingdom & one of the largest oil companies worldwide, even since the Deep Water Horizon incident in the Gulf of Mexico, where BP had to sell off a considerable amount of assets to make for the billions lost in the incident (Mathews 25). Even since this, they still continue to hold their presence in more than 100 countries and employs over 120,000 people. After overcoming the tragic events of Deep Water Horizon, BP now plans to focus their efforts into the oil rich land off the coast of Russia. BP had been operating in Russia since 1997, initially through minority stakes in Russian oil companies, and since 2003, through TNK-BP, a 50-50 joint venture with AAR, an affiliation of Russian investors. This joint venture allowed BP access to extensive oil reserves in Russia and was one of BP’s most valuable assets, accounting for 25% of BP’s production in 2007. But in 2008, Np and its partners in TNK-BP encountered serious disagreements about how to run the company going further. A string of government actions including raids by the Russian tax police on BP & TNK-BP offices in Russia as part of an alleged criminal probe led to the firing of TNK-BP CEO Bob Dudley. With this, BP and its partners reached an agreement in principle to create a board of directors for TNK-BP that was meant to ensure equal representation for BP & AAR, and then in November of 2009, Maxim Brodsky was nominated as TNK-BP’s new chief executive. (Hitt, Ireland, & Hoskisson)

Strengths:

        One of the greatest strengths of BP is their strong brand name. The BP brand was ranked 10th among Fortune Global 500 with a brand value of over $225.9 million. Within the oil and gas industry, the BP brand was among the top five most valuable brands. A strong brand name is an internal strength because it provides a competitive advantage against smaller brands in the same industry. Additionally, the global operations of the company enable BP to serve a larger market and spread risks throughout the business. BP also operates as one of the biggest in the energy sector and prides themselves on their top quality operations. Finally, BP is among the largest oil and gas companies in the world, which implies that the company enjoys economies of scale. (Fortune 500)

Weaknesses:

        BP has 3 main internal weaknesses. First, the company operates in an industry that has very high costs of environmental hazards. This is due to the risk of disasters such as oil spills and fires that often cause significant damages. The company has to incur these costs, which eats into the profitability. Second, BP suffers from widespread negative perception, especially after the Gulf Oil Spill in 2010. (Mathews 25). The company has to deal with this negative perception to ensure that it retains its leading position. This will require a multifaceted approach. For instance, the company is already attempting to address the problem by compensating the affected people and areas. However, this should be complemented by the development of better ethical policies that will ensure the errors leading to the oil spill are not repeated again. Then last is the natural decline in oil production. There has been a major fall in oil and gas production, which in-turn could create a major fall in production, which would see a decline in sales and profitability.