In this study, the strategic environment in which British Petroleum (BP) operates has been

discussed. The company follows a ten-point strategy which includes the safety issues and the
operational functions that are based on the strengths of the company, such as relationship with
the employees, value chain, technology, etc. If the business trend of BP is considered, then it can
be said that it did not reveal a positive scenario because of the oil spill that took place in the Gulf
of Mexico. The US government had nearly cornered BP and its operations in their geography due
to the environmental damage its oil spill had spread. This also negatively affected the company
in terms of its goodwill and financials. The competitive element that BP has due to which it is
recovering faster is its alternative energy initiative to produce renewable energy, biofuels, and
other energy through wind and solar power. As far as the core competencies of the company are
concerned, it has strong goodwill, internal control, and are well known for its exploration skills
too. The major competitors of BP are Exxon Mobil, Royal Dutch Shell, Chevron, Valero Energy,
ConocoPhillips, Sunoco and LUKOIL Petrobras. However, three of its competitors, namely,
Exxon Mobil, Royal Dutch Shell, and Chevron are chosen for conducting a comparative analysis
with BP in this study. Different companies in the same industry have different competencies, but
this does not mean that they hinder the growth of other company. The companies in oil and gas
industry have huge market capitalization and their customers are also fixed, so there is negligible
scope of cannibalization of market share.
This study aims at critically analyzing the strategic context in which British Petroleum (BP)
operates by utilizing conceptual framework. Further the significant business trends would be
identified, and competitive elements would be discussed, so as to identify the strategies which
BP should focus upon. BP is listed on the London Stock Exchange and its market capitalization
in the year 2012 was £81.4 billion (BP Plc, 2013a). The major products that BP offers are natural
gas, aviation fuels, motor fuels, and petroleum. The revenue of the company in 2011 to $375,517
million, compared to $297,107 million in 2010 (Yahoo, 2013). BP is into finding and extracting
oil, moving them to different place, refining them, generating low carbon energy and offering
various services to customers through their retail outlets. The well-known brands of BP are
Castrol, ARAL, ARCO, AmPm, and Wild Bean Café. The companies in the oil and gas industry
all around the world are looking for better opportunities and solutions in order to overcome the
challenges and problems related to procurement strategies in relation to multi-cultural
complexities in different countries. Companies seek to achieve competitive advantage in the
market and grab market share in order to attain long term sustainability (Market Watch Inc.,
2013). Multinational oil companies are not exempted as they also have been striving hard to
perform better than its competitors and have been looking for better opportunities indifferent
parts of the world. Procurement and supply chain are used alternatively in the oil and gas sector
industry. Procurement was not a major area of concern for the companies in the oil and gas
industry previously. They were more concerned about rapid expansion of their business through
fast exploring of oil using improved technologies used for the purpose. Until recently the oil
companies started realizing the fact that major portion of the operating expenses of the
companies were spent on its procurement or supply chain system.
It has also been observed that a particular project can go all in vain if its procurement system is
not managed and controlled effectively. BP follows a ten-point business strategy to grow value
for its stakeholders. These ten points are the ten values that BP expects to deliver to its customers
and other stakeholders of the company. The first point is to focus on the safety issues and
function based on the strengths of the company, such as gas value chain, Deepwater, technology,
employee relationship, and giant fields (Tech, 2012). The customers can expect safety and
effective risk management measures, strong focus, standardized services, visibility and
transparency. Apart from this, the measurable values that BP offers to its customers are, active
management of portfolio, increasing operating cash of the company, strong balance sheet and
stable financial condition of the company. As far as the existing market is concerned, BP has
penetrated into many countries and has many retails outlets too, which most oil and gas
companies do not have. This means they cater to corporate clients, but also offer value through
their products and service to retail customers too. Further, in order to expand to other untapped
market, it also spends on advertising, promotion, and flexibility in terms of price, procurement
policies and strategies based on the market condition of the country.
BP has also taken initiatives in producing biofuels in order to find sustainable ways of designing
products. Even solar energy and wind energy is being also utilized by the company to offer
ecofriendly products and services to the customers around the world. Since the level of
competition in the oil and gas industry has also increase, so companies are looking out for way to
differentiate their offerings from others. In case of this industry, offering environment friendly
products and services are a unique selling proposition on the part of the company.
Considering the present scenario, the business trend of BP does not reveal a positive picture.
This is because of the Deepwater Horizon oil spill that took place in the year 2010. After this
incident, US government has cornered BP and the company was not offered federal contacts,
which was a huge blow on the bottom line of the company. After this heavy penalty was charge
on BP for such massive environmental damage that occurred due to the mismanagement and lack
of attention and sincerity (BP, 2010a). Due to this reason the company recorded a net loss of $2.4
billion in the year 2010. They also spent around &17.7 billion to clear the oil spill. Apart from
that, they gave out more than $15 billion to the trust funds as compensation to the victims of oil
spill. This reveals that BP has been confronting volatile trends in business since the oil spill. The
stock prices of the company went down considerably and a loss of $60 billion in the market
value of the stock prices of the company (Ferris, 2012). Based on the information of the external
and internal market trend, BP’s production in 2011 was lower than that of 2010, due to
divestments, diminishing rate of production in the Gulf of Mexico. The loss that BP had to incur
due to the oil spill in the Gulf of Mexico affected the company’s financial strength in 2010, and
it also shadowed the growth and profitability in 2011 (BP, 2010b). In the year 2011, BP got into
a deal with Rosneft, the market leader in the Russian oil and gas industry. The company got into
deal with Rosneft for long-term profitability. It exchanged 5 percent of its shares with 9.5
percent of 9.5 percent of Rosneft’s superior rated stocks (Schiller, 2012). Though the stock
swaps would dilute the earning per share of BP in the short run. In addition to this, BP also has to
also incur the expenditure for the development of oil and gas reserves in Russia on Kara Sea. BP
has invested about $7 billion for the research and development of alternative sources of energy.
These alternative sources include wind, biofuels, carbon capture, solar energy, and sequestration.
BP has opened a Cedar Creek II of $475 million in Colorado which would be utilizing around
250 megawatt of wind energy for supplying power to 75,000 houses. This division of alternative
energy source also employees around 6000 people.
This can be considered to be one of the major competencies or competitive elements of BP. BP
has diversified its business towards alternative sources of energy because they have projected
that a dramatic increase in the demand for renewable energy can be seen in the next 10- 20 years
(Proctor, 2011). The company have started investing in alternative source since 2005, so that it
can make this as its core competency in future. Other competitive elements of BP are its other
products such as biofuel, microbes that would support in enhancing the recovery of oil. In
response to the oil spill that occurred, BP has started taking greater risk and safety measures.
New risk management system has been developed by the company, which is consistent and fast.
The upstream business has been restructured into three major divisions, namely exploration,
developments, and production. All these elements have developed the core competencies of the
company strongly after the setback in 2010 (BP Plc, 2013b).
Of all the strategies and competitive elements that BP has undertaken or working towards, the
most significant is its initiative towards the development and growth of its division for
alternative energy. The oil and gas industry depends on natural resource and time is coming
when excavating excessive natural resource would be harmful for the world, so the long-term
planning of BP to utilize the natural resources which are easily available, such as wind and solar
power would be its unique selling proposition (BP Plc, 2013c).

This section of the study would be evaluating the internally developed assets or intangible assets
that the BP has, its resources and competencies. This would assist in estimating the strengths of
BP and identifying the inputs which support the company to generate good business. After this, a
comparative analysis of BP with its competitors would be done, in order to highlight the
competitive advantage which BP enjoys in the industry. BP is associated with a rich history and
has achieved numerous landmarks on its way to become a large multinational company as it
stands today. BP is committed towards becoming the industry leader and maximizing the wealth
of its shareholders through energy supply to its customers in a responsible and safe manner.
The internal developments and intangible assets of BP can be identified by analyzing the internal
audit reports of the company, as it focuses on the management, major risks, and internal control
of the company. Apart from this, the intangible assets such as goodwill of the company also
indicate the internal sustainability. The developments of BP have been recorded in every aspect
or functions ranging from refining to IT system of the company. The future plans such as
establishing alternative energy department as the most competent business line since 2005 is also
an internally developed asset. The efficient management of the operations assisted the company
to maintain a sustainable position in the oil field at Alaska, or in the Stock Exchange of London.
The internal assets of BP are its strong process, efficiency of workforce, and improved internal
control system (Porter, 1991).
The requirement of the world for energy is growing daily, and BP offers energy to the world.
They convert the sources to various products. They maintain high standards in whatever they do
and strive hard to attain safety. When it comes to discussion of internally developed assets of the
company, BP puts forward that safety, respect, excellence, courage and teamwork are their
greatest assets. Everything that companies in this industry do depends on the safety of
communities, environment and employees, so safe management is what plays a critical role in
the company and day to day operations. BP respects its customers, and the environment in which
it works in. This asset assists them win the trust and respect of others, so the company cares
about the consequences of their operations on the environment and the stakeholders. Achieving
the outcome in the best possible way is another asset of the company (Porter, 1980). The
company aims for enduring legacy in spite of the short-term priorities. Dealing in oil and
petroleum industry requires great courage because the operations are quite risky, so courage in
achieving the best and courage to explore new avenues of resource is there in the workforce as
well as in the management of BP. Finally, the biggest asset is its team strength as without the
trust and teamwork organization do not exist and the company would not have been competing
with the top players at international level (Porter, 1985).
British Petroleum Plc operates business with the help of three operating divisions such as
marketing and refining, production and exploration and other businesses. Production and
exploration division perform activities like oil and natural gas exploration, field development,
midstream transportation, crude oil production, etc. British Petroleum Plc also promotes and
markets liquefied natural gas (LNG) and natural gas liquids (NGLs). It mainly focuses on three
aspects of business such as managing risk associated with oil exploration process, delivering
standard performance and developing personnel and technological capability. Multinational oil
companies need to outsource certain activities such as technology integration, sourcing the
supply in order to decrease overall operational cost. The major resources that BP considers is its
human resources, oil wells, technology and equipment, and the natural gas reserve which it has.
Organizing the human resource and technological capital in profitable manner is also the key
success criteria for BP (British Petroleum, 2008). The Company emphasizes on backward
integration of operation and third-party sourcing in order to increase business efficiency. Apart
from this BP takes adequate care of human resource policy of the country, government policies
regarding oil and gas exploration, and technology up-gradation in order to be successful in long
run. They have adequate material reserve to maintain flow of operation in contingent
periods (BP, 2011).
Different companies in the same industry have different competencies, based on their areas of
expertise. BP is always known to have competency in exploration skills. BP developed forties
field n the North Sea and in the northern cost of Alaska. Reduction of greenhouse gas emission
and development of alternative sources of energy is another competency of BP. The corporate
strategies of the company revealed certain other competencies of BP, such as the ethical conduct,
environmental performance, finance and internal control, health and safety. The company
operates with the help of diversified and talented human resource. For example, recruits and
selects highly qualified local and foreign engineers in order to ensure quality in production and
exploration activities. Brand equity and intellectual property are the biggest intangible resources
for BP (BP, 2011).
Barney (1986) has stated that competitive advantage for any firm depends on its resource
capability. The competitors of BP chosen for this study are Exxon Mobil, Royal Dutch Shell, and
Chevron. Every company has diverse competencies, and this does not mean that the competitors
hinder the sustainable growth of BP. All these companies are the market leaders in international
oil and gas industry. Each of them differs in size in term of their profitability and market
capitalization, but the internally developed assets and the resources are almost similar because in
this industry there is not much variation available in terms of products and services, equipment,
technology, or strategies. However, difference in human resource management, strategic
framework of the company, and choices in areas of operation. Disasters like oil spill has
occurred with each of these competitors like BP and every oil and gas company face
innumerable number of lawsuits when they break the environmental laws. It can be said that BP
has its own identity and fixed sets of customers who are not driven away by its competitors (BP,
2011).
BP competes with the global players like Exxon Mobil, Royal Dutch Shell, Chevron, Valero
Energy, ConocoPhillips, Sunoco and LUKOIL Petrobras. However, three of its competitors,
namely, Exxon Mobil, Royal Dutch Shell, and Chevron are chosen for conducting a comparative
analysis with BP. The parameters on which these oil and gas companies would be compared are
the intangible assets of the company, resources, and competencies.

Exxon Mobil High brand The company possess  Metallocene

recognition assists a catalyst
the company to reap strong human process
profits. It resource,  Organic and
also maintains an latest technological inorganic assets
industry leadership equipment for acquired by the
through economies research company
of scale, strong and development, and  technological
research and utilises it to unearth innovation, towards
learning segment, the achieving cost
vertical raw materials or economies and
integration, product natural process
diversification and resources for further improvement
sustainable refining.  Financial expertise,
financial position. in
Leadership the crucial and highly
in terms of excellent speculative market
operational  Development of
performance is new
also enjoyed by fields
Exxon.  Portfolio Quality
 Long-term
Perspective
 Value
Maximisation
(Exxon Mobil, 2010).
Royal Dutch Shell The internally Shell utilises open Commercial and
developed resourcing method technical expertise
assets for Shell are its for  Distribution and
workforce, and recruiting workforce Production of Natural
 strategic or gas
framework. Apart human resource.  Skilled Employees
from this, Performance  Managing
intangible assets such management cycle of decentralised
as the company consist and globally
goodwill, trademarks, of diversified
software, and high tools like competency business (Royal
recognition framework, appraisal Dutch Shell Plc,
are also the result of tools, etc. Other 2011).
internally resource includes the
developed IT framework of the
competencies, so company, oil wells,
they also form the and
assets of the financial strength
the company.
Chevron Chevron has strong Chevron has ample Technological
employment branding amount of natural Infrastructure
strategy. The resource in different  Capabilities and
turnover rate is continents to skills
effective managed by manufacture quality possessed by human
the products and offer resources
human resource and value  Managerial skills
policies to customers. Other  Distribution
are incorporated than channel
pertaining to that, team of skilled (Chevron
employees’ safety workforce is also Corporation,
and there 2013).
satisfaction. It is the in Chevron. The
second company has the
major oil and gas largest
company reserve of natural gas.
after Exxon Mobil.
Due to its
vertically integrated
framework,
Chevron’s
operational function
ranges
from mining, oil
production,
to manufacturing of
petrochemical. The
intangible
assets and goodwill
of the
company was 1.9
 percent of
its revenue generated
in 2012.

Strengths
1. Strong Global Presence
2. Strong brand value
3. Diversified product portfolio
4. Consistent annual per share dividend
payout
5. Complete Integration of process
6. Leveraging technology to push energy's
frontiers
Opportunities
1. Increasing global energy demand
2. Renewable energy market looks very
promising
3. Invest in agility through digital
innovation
4. Partnering with leaders to develop low-
carbon technologies and target
breakthrough technologies
5. Investing in technology-driven
exploration program
Weaknesses
1. Remaining bullish with dividend pay-
outs leading to inefficient
Financial planning
2. Highly dependent on upstream
production
3. Legal Issues tarnishing brand value
Threats
1. High Competition in LNG segment
2. Penalties for carbon emissions
3. Economic Crisis and travel bans
stemming from the novel Corona
virus outbreak, resulting in tumbling oil
prices
4. Volatile crude prices

Political Economical Social

1. Geopolitical conflicts and
tensions in Middle East
2. Effect of trade
regulations and sanction on
business
3. Impact of change in tax
policies
Technological
1. Artificial intelligence and
1. Fluctuating crude oil 1. Consumer awareness and
prices and impact of focus on environmentally
slowdown Friendly Fuels
2. GDP and economic 2. Investors' pressure to
growth venture beyond their core
business
3. Level of social concerns
& awareness in society
Environmental Legal
1. Regulation of greenhouse 1. Protection against
 automation in oil and gas gas (GHG) emissions intellectual property
2. Higher adoption of 2. Impact of adverse infringement
internet of Things devices weather conditions 2. Health and Safety in oil
and edge computing 3. Initiatives for Carbon and gas industry
3. 3D virtual modelling and Capture and Storage (CCS)
drone technology 4. Increasing focus on
business sustainability

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