Strategic Management – BP PLC Company

Summary

BP PLC is a major oil and gas producing company headquartering in London, United Kingdom. Having operated for more than a decade, the company decided to invest in renewable. The investment was about a global climate change need. The company established a ten-year strategic plan to push its new investment approach forward. The project has seen a significant impact on climate change, resulting in low carbon emissions. However, the company faces many challenges in its renewables segment in the United States. Business-level Strategy and corporate Strategy using, Environmental and competitor analysis, encompassing critical regulatory issues facing the industry, and Resources and capability audit are some of the ways the challenges faced by the company could be analyzed.

Introduction

BP PLC is an oil and gas company based in London, United Kingdom. It was founded on April 14th, 1909, and has been in operation for over a century. The company generated 183.5 billion USD IN 2020, making it one of the best performing companies worldwide. The organization has employed a total of 70,100 employees by the end of 2020 (Carayannis et al., 2021). It was founded by William Knox D’Arcy, Charles Greenway, the 1st Baron Greenway. By the end of the 2020 financial year, the company had a net income of US$ 20.73 billion and total assets valued at US$ 267.65 billion. Besides, the company is under the leadership of Bernard Looney, who has been the Chief Executive Officer since Feb, 5th 2020 (Carayannis et al., 2021). Also, Helge Lund serves as the Chairperson of the multinational. The company operates in over 80 countries and has around 18, 700service stations globally. Nevertheless, the company is one of the seven supermajor oil companies globally. Its operations include exploration, production, refining, distribution, marketing, generating power, and trading (Carayannis et al., 2021). Noticeably, the oil and gas company has interests in renewable energy, including wind power, biofuels, solar technology, and smart grid. Hence, the organization operates in three main segments: downstream, upstream, and renewable. However, BP plc renewable business segments have been facing a lot of challenges in the American market, which has been motivated by their strategic plan, the level of competition, and the resources and audit capabilities.

Company Segments

The company is well managed, and the three segments have their functions that keep the company moving. The upstream segment does the natural gas and oil exploration and field development and production. Also, it engages in midstream transportation, storage, processing, marketing, and trading natural gas (Marques, 2019). Besides, the downstream segment refines manufacturing, market transport supplies, and crude oil trading. In addition, the renewable segments deal with the productions of biofuels, solar technology, wind power, among others. The company has been critical about climate change. Thus, it decided to invest in renewable to address the problems of climate change globally. Oil and gas impact the environment, and the introduction of natural renewable energies is a call to reduce environmental pollution.

Current Business-Level Strategy and Corporate Strategy

The company’s current strategy is to have a different kind of investment where it has accessed the need to invest in low carbon while also focusing on oil and gas productions. The company’s primary aim is to ensure reduced emissions to the air and that the environment is conserved. The strategy runs for a decade until 2030 (D’Northwood, 2020). The corporate strategy entails growing the value of its stakeholders and reducing the corporate overhead to around 15 and 20% (Atris et al., 2019). The company is gambling between making incredible profits, having the value of the shares grow, and limiting the impacts of their energy on the environment.

Barrier to Entry

The United States of America holds strict governmental policies that may negatively affect the company’s strategy for the establishment of renewable in America. The United States values its domestic industries, and it is a great challenge for an international company to find an immediate market in the United States. Thus, BP plc would have to influence the customers to offer quality products that meet the American market. New products take time to be accepted in America, and the company’s current strategy of having more renewable energies will take time (Atris et al., 2019). Thus, their ten-year plan to be fully in the American market might take longer, which will affect the organization’s corporate strategy. The company expects to attract more profits and have grown to its shareholders’ value, but that could be far from possible as entry to the American market comes with a price.

Pollution

Renewable energies still pollute the environment. Thus, the strategy would still cause impacts on the climate hence could not be the solution. The company’s strategy is to control gas and energy emission levels into the atmosphere. However, the production of solar panels requires a lot of energy; thus, the United States government is not impressed by the company’s activities (D’Northwood, 2020). However, renewable energy could result in a positive outcome compared to non-renewable energy.

Costs

The strategy to have more renewable energy in the United States is very costly. The costs of building and installing wind farms and solar facilities required much capital. There is a need to acquire enough pieces of land and get the structures in place. A foreign company is overcharged in the United States, and the cost of maintaining the business is much higher and faces the great challenge of balancing the financial records (Crayannis et al., 2021). The company will have to spend a lot of money before the strategy to have renewable energy take over the American market. The high cost will automatically affect the current business-level Strategy and the corporal strategy.

Politics and Business Regulations

Power has a great capacity to influence the success of companies. The government of the United States has put in regulations that favor domestic companies over international ones. ‘Buy America, sell America’ is a campaign slogan and strategy used by former United States President Donald Trump to try and convince the Americans to use the locally assembled products. However, the claim has led to low sales of BP’s renewable energy. It has negatively affected their strategy of attracting more customers by introducing new renewable energies.

Environment and Competitor Analysis

The environment is an external factor that affects the success of a business. Also, competition is a threat that could result in business failure. Pestle analysis helps evaluate the political, social, economic, legal, technological, and environmental factors that affect any company or a business. Exxon Mobil Corp is one of BP’s main competitors in the United States (Atris et al., 2019). The Firm is a public entity, thus challenging the impacts of BP plc in the United States market. Exxon Mobil Corp has a competitive advantage over BP plc in the United States. This is because the nations advocated for domestically made products; thus, most consumers prefer Exxon Mobil over BP plc. Other top competitors include Chevron Corporation, Royal Dutch, Total, and ConocoPhillips. These companies are well established and are multinational, thus posing a significant threat to the renewable energies produced by BP plc Company (Atris et al., 2019). Most of these companies are doing better than BP plc as they have created a great working relationship with the United States government. The competitors offer non-renewable energy, the most used energy source in the United States. Thus, it is not very easy for renewable energies to sell compared to other energy sources.

Environmental regulations have played a massive role in the management of the company. The Federal Energy Regulatory Commission is mandated to oversee energy generation, transmission, and distribution (Atris et al., 2019). Thus, the department has so much impact on the company’s ability to generate and distribute renewable energy in the United States. One of the significant challenges includes following and keeping the environment clean from malpractices that could jeopardize natural resources. While generating renewable energy, the BP plc company is responsible for avoiding more gas and energy emissions to the atmosphere, which is a great challenge. The government is always fining the company for various malpractices that lead to environmental pollutions—nevertheless, the legal requirements needed to get licenses fully. The company does not always access the rights to generate all forms of renewable energy it wants to invest in. The Federal Energy Regulations Commission ensures that domestic companies are protected from external exploitations. Thus, the practice poses a significant challenge in BP’s renewable energy segment. The United States economy depends so much on domestic businesses. Therefore, foreign firms are restricted from having a more substantial impact on the local market. Also, BP plc is well known for non-renewable energy, oil, and gas, thus intruding new products will take time to be accepted in the United States of America’s market (Atris et al., 2019). Therefore, the company would need to conduct product awareness and advertise the energy more often before the consumers get used to it.

Resources and Capacity Audit

Resources audit helps gather the needed information to compile the resources available in an organization. It gives the company’s position in possession of human and natural resources. Besides, a capacity audit involves the formal systematic assessment of a company’s ability to achieve the set goals and objectives. A VIRIO analysis helps evaluate the company’s capabilities that offer them a competitive advantage. The BP plc company faces many challenges because of its resources. The government of the United States is always in its arms to ensure that the company pays all its taxes as required by the law (Pickl, 2021). The company has faced several lawsuits. It has been convicted for failing to show the amount of money and resources it has invested in establishing the renewable energy structures in the United States.

Despite the government’s call for a green economy, it expects any investment made by a foreign company to generate maximum revenues. The company is committed to taking action on climate change. Thus, it is investing in renewables, but the footprints are practically invisible compared to an average of 3,8 million barrels of oil, equivalent to a day the company produced two years ago (Marques, 2019). The investments earnings from the renewables are much less as compared to the revenues the company generated from the sale of oil and gas. The company owns many assets in Britain, North and South America, Africa, and others, which calls for accountability, thus posing a great management problem. The company had about 267.7 billion US dollars assets by 2020, but the figure decreased by 30 billion dollars by 2021 (Carayannis et al., 2021). This impact has resulted from the investment done in the Renewables in the United States. The sale of renewable energy has attracted little customer base, thus challenging survival in the next ten years. However, the company can be successful in the United States because the capacity audit shows the company has made billions of dollars in profits and can comfortably invest in renewables. The company should hold its strategic plan of investing in renewable energy as the world is still not ready to shift from using oils and gas. Non-renewable energies are more dependable and consistent; thus, BP plc should reconsider its plans.

 

Recommendations

  1. BP plc should first educate the target group on the advantages of using renewable.
  2. Much energy should be put on advertisements and marketing renewable energy.
  3. The company should work together with other domestic companies in the United States to strengthen its influence.

Conclusion

BP plc idea to invest in renewable is an excellent idea meant to address the impacts of climates change. By introducing renewable energy to the market, the company is ready to control the rates of carbon emission, thus helping to solve the problems of climate change. Despite the low revenue generations from the sale of renewable energy, the company should never give in its pursuit for friendly energy usage by the people. The government of the United States should thus support the investment of renewable by the BP plc company and encourage more investments and use of renewable energy.

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