BP Case Study (British Petroleum)
Introduction to BP
BP is most widely associated with its fuel stations and forecourt retail operations, but has a wide range of activities including exploration for oils and gas, extraction, transportation, processing and selling fuels and developing low carbon energy initiatives such as wind farms and solar power. Its forecourt food operations are specifically branded: BP operates the Wild Bean Café brand in the UK, Europe, South Africa and Australia and the am/pm convenience store brand in the US.
The company aims to be competitive on price for its fuels, and this is evident on garage forecourts where drops in oil prices have been passed on to consumers more rapidly that with some of its competitors. However, its Wild Bean Cafés are focused on quality food and coffee, with a strategy of differentiation from poorer quality refreshments offered by competitors.
Reasons for Success
- BP has evolved from several companies dating back to the early years of the 20th century, focused initially on oil extraction in Iran. When political upheaval threatened the UK’s interest in Iranian oil in the 1950s, the UK government took over some ownership, not divesting its shares until the 1980s, with national interest safeguarding the organisation
- the company is forward-thinking with a number of ongoing projects across its portfolio
- industry uncertainty in the 1970s led to fuel companies diversifying, providing a broader portfolio of activities hence spreading risk
- A programme of investment and divestment has kept the portfolio focused: for example, in the 1970s, food products were developed as a fuel byproduct, but these operations were sold.
Threats and Problems
- BP is currently underperforming compared against its competitors
- Its strategy to overcome underperformance is simplification and increased efficiency of operations: however, competitors are also able to take these routes and continue to outperform BP
- The company’s safety record has been questioned: in 2005, an explosion at its main Texas refinery killed 15 workers and mismanagement has been blamed.
- BP held oil at the Buncefield depot where there was also an explosion in 2005. Although BP’s area of the depot was not significantly damaged, locals are apprehensive regarding its wish to begin storing oil at the depot again, and it is having to go through a lengthy risk assessment and planning application process with the local authority
- TNK BP in Russia is currently experiencing power struggles between British executives running it and Russian billionaire shareholders
- BP appears positive regarding its future strategic intentions, but has clearly struggled to compete recently, raising questions about its future performance
- The organisation plans to franchise and exit from some of its operations over the next few years, but still retain coverage: franchising could threaten the company’s span of control.
- BP’s strategic focus on alternative energy has the potential for success as it is the fastest growing sector for energy suppliers at the moment.
- BP will be sponsoring the 2012 Olympics, affording it the opportunity to reverse some of its less favourable PR.