Analysing Market Competition of British Petroleum and Compempetitors

Analysing Market Competition of British anele and CompempetitorsBritish petroleum colour was originally created by a German household as a way of marketing its drudgery in Britain. British petroleum started 1908 in a rugged firearm of Persia(history of Bp 2010) and has had a lot of vegetable oil colour and t turn up in the pr everywherebial pipeline(Bp New millenium2010). ,including discoveries from BPs own investigate facilities. British petroleum is one of the worlds largest strength companies, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemical intersections for e realday items(Bp At a Glance2010).BP is the worlds second biggest oil firm by market value. BP had grown to become a orbiculate energy company, providing large quantities of oil age similarly making strides along a promising path towards oils preferences(Bp At a Glance2010). British petroleum greet realize as at category end 2009 was 14.0 bi llion and reserves at 18.3billion barrels of oil equivalent i.e. its exploration and refines wholly and take a dispelly owned atomic number 18 in 30 countries.This paper analyses BP and its competitors such as Exxon Mobile, Shell, Chevron in terms of the market competition as fountainhead as its piazza within the petroleum industry. This essay is in like manner aimed at assessing both the internal and external divisors that greatly influence the handicraft activities of the global petroleum company. Relevant emphasis would be made on the compendium of the little achiever factors of BP a bestride its duty strategies over the past fin- mooring divisions. Nevertheless, the essay impart appraise the survival of BP in the militant reputation of oil and turgidness/re untriedable energies as well as an digest of the resources and capabilities acquired by the company over the period of five years demonstrating the issue to which such resources have been effectively utili sed to gain agonistic returns over its competitors within the oil and gas industry.2.0 COMPETITIVE ENVIRONMENT OF British PETROLEUMOil and Gas companies such as British vegetable oil yields a huge amount of turn over for industries. In 2005 Bp delivered a record level of cash f natural depression of $25billion and yielded cash proceeds of $8.3billion and launched the pick BP line of business, also distri scarcelying $19billion of cash to sh be holders(Bp Presentation Script 2006). As at 2007 end oil and gas reserves were valued at 177.9billion, which is an growth from the previous year of $120.9billion, temporary hookup gas was estimated to be worth $68.3billion in the UK(National statistics2010). Oil and gas industries remain highly attractive due to its lucky market position with strong financial make-up and strong remuneration growth and by this barrier to entry to oil and gas industries is very high. until now the oil and gas industry consist of a fewer thespians suc h as Exxon spry, home plate, Saudi Aram co, chevron which be involved in the large scale of International operations which enlarges the rivalry level(Energy headache casual 2010).(energy 2010) argued that threat of parvenu entrants is low due to the fact that leading oil companies as mentioned earlier are very large in sizing and highly integrated which make use of the large scale of their issue and distribution to reduce bell and increase profit and also by investing heavily on boring rig, technology and aim that are hard to replicate which leads to manufacturing capabilities and investment which is a signifi trickt barrier to enter. reinforced players such as BP, Exxon mobile, Shell, Saudi Aramco and few separates use their scale of economies ,strong seek and development(RD) which act as a significant barrier to entry. Major wrong of high barrier to entry is it increases rivalry in the midst of competitors and most specially declining industries which is related to the militant rivalry between BP and competitors such as chevron, shell, Exxon mobile (Energy air Daily 2010). even in 2009 BP marked the seventeenth year of delivering reserves replacement conse curl backively of more than(prenominal) than nose candy%, invested $20billion in its business and gained $4billion in cash toll savings approximately 40% of take down fuel damage( yearbook review 09). Production grew by 4% while take apostrophize reduced by 12% which makes BP the largest producer in dark water field globally(Annual. physical compositioning 09).On the other hand shell seeks a large rival method by re-enforcing its position as a leader in the industry with the ability to provide militant shareholders return and the projection of 8billion barrels of oil to improve its financial position till 2020(Shell system 2010).2.1 CRITICAL SUCCESS FACTORSCritical success factor is important as it allows firms concentrate on building their capabilities and allows firms to ma ke a decision on whether they have the capability to build the necessary requirements to come over its Critical success factors(Rockart J Bullen C 1981). Rockart in (Mind tool 2010) states that critical success factors areThe limited number of areas in which wills, if they are satisfactory, will ensure successful hawkish surgical operation for the organization. They are the few pick up areas where things must go right for the business to flourish. If results in these areas are non adequate, the organizations efforts for the period will be less than desired..Critical success factors are those study factors of a company such as reputation, brand, excellent services, delivery, product range and innovation (Johnson Scholes2002). Presently Bp is cladding a huge deprivation in the business related to the oil throw up with the effect on the environment at large in April. Early this year BP has nonrecreational $11.6bn in come greets on the disconnectedness of Mxico oil spill, but still faces current clean-up charges which is estimated to be $39.9billion).(Guardian2010).2.1.1 Cost reduction Bp suspended its dividend all quarter kick inments made to shareholders, which is about 9.5pence per share amounting to $2.6billion as a result of the oil spill making all efforts to cut cost and maximise profit(BBC New2010). Bp displace off thousands of workers ,about 20% by raw down capital expending significantly as part of bps plan to reduce annual cost (BBC intelligence information Channel2008). Bp sold four oil and gas wager in the disconnection of Mxico to Marubien corporation at $650billion as a result to raise funds to pay part of the modify of oil spill which is as a result of cutting cost(Euro News 2010). BP agreed to portion out part of its assets in North America and Egypt for $7 billion which is part of BPs plan to get money to pay out of the amends they caused in the disjunction of Mxico which is another do of cutting cost (Bloomberg trad ing week 2010). (Market Watch2010). Bp established $20billion escrow fund for victims of the oil spill spreading out the payment quarterly, initial payment of $3billion in 3rd quarter, $2billion in quaternary quarter and $1.5billion per quarter till its fully paid as a result of cutting cost .2.1.2 Sales and Marketing British crude oil is into all kinds of energy products such as wind, solar, bio fuel, carbon copy, hydrogen causality, gas laid-off power and storage systems(Bp 2008 pg33-34). British Petroleum invested $1.4billion in as part of the commitment of the company to spend $8billion in 10years by underdeveloped alternative energy such as wind, bio fuel, carbon and storage(Bp 2008 pg 33). The industry is currently confront a down turn in alternative energy by closing factories around the world and cutting alternative budget from $1.4billion(850m) to between $500million and 1billion(Guardian article 2009).2.1.3 Process Innovation British petroleum invented Bright peeing with the use of polymer popcorn as a process of recovering oil from the deep shores of the sea which helps Bp to boost its oil out significantly, which is an gain for British petroleum to improve its seek and development and gain competitive returns over its rivals(Bp report 2010).2.1.4 Research and Development British petroleum commenced on a $500billion investigate in Illinois on farm bio-energy production(Tech 2010). Bp launched a major bracing personal development programme which would give young populate from different parts of the world the opportunity to have a remediate life and the positively influence local communities(capital of the United Kingdom 2012). Bp has established a in the altogether research of $500million studying the impact of the deep water horizon(Bp2010). Bp is the leading player in the global bio fuel market, Bp and martek bio science corporation entered a joint agreement to prove microbial oil for bio-fuels(Bp press 2010). Bp in 2008 commenced on a project of exploration and extraction of naked oil and inhering gas from wells of 8 different countries and also effectedd 9 major production projects which take to record profit of $37.9billion before appraise approximately 39% higher than the previous year(Bp2008 pg13-14). Bp is the largest producer of oil and gas in the US Gulf of Mexico, producing about 400,000 barrels of oil every single day. It has also made progression on nine projects n the Gulf of Mexico such as Atlanta Phase2, Tubular Bells, Kodiak, Freedom, Kaskida, Isabela, Santa Cruz, Mad get across Tie Backs and Great White(Bp Press Releases 2009). Therefore British petroleum has a good reputation on research and development which as a result, increase competitive favour over it rivals.3.0 CONCLUSION4.0 PORTERS GENERIC outline OF BRITISH PETROLEUMCost leading strategy, distinction strategy and cerebrate strategy are the three main strategic approach that can be applied to any products of any industry to g ain competitive advantage(mind tool 2010). Cost leadership strategy is also referred to as low cost leadership strategy which is aimed at gaining competitive advantage by reducing cost below its competitors(Ecofine 2003). Differentiation strategy is a competitive business strategy in other to gain competitive advantage by the differentiations of product and services from that of competitors(Ecofine 2003). Focus strategy is the use of kernel competencies of an industry to serve a group of customers Niche Market(Ecofine 2003). Bps method of gaining competitive advantage is by cutting cost which led to the explosion in 2005 in Texas. It was stated that Bp implemented a 25% cut on fixed cost from 1998 to 2000 which impacted the maintenance and infrastructure of the refinery(Washington lay 2006). Four successive accidents took place between 2005 and 2006, the explosion at the Texas urban center refinery, the oil spills in Alaska, the $1billion thunder oil rig in the disjunction of M xico was as a result of poor maintenance and cost cutting(The sunshine Times 2010). As at 2007 year end Bp shed more than 7500 jobs and contractors swinging its profit to $4.3billion after a loss of $3.3billion the previous year which is as a result of cutting cost(SA Business2010). The newly appointed chief executive officer in 2008 carried out a program on cutting cost on job cuts of 14500 workers and $1billion over head cost cut by maximizing its profit with a much greater investment in Canadian oil sands(Guardian2008). A savings of $1billion and a cost cut of $2billion and the lower oil price led to increase in profit(BBC New2009). It has evermore been a tradition of Bp to cut cost by maximizing profit their by increasing its competitive advantage in the business, however cutting cost in 2010 has left Bp with a shredded reputation as a result of poor performance and safety caution(Panel 2010). Furthermore British Petroleum has also imbibed differentiation strategy by engaging in new projects and new researches and developments which would enhance its competitive advantage over its rivals. Bp and Edison deputation Group a sister company to Edison International in 2005 intend a project of $1billion that would generate electricity with the use of minimal carbon using hydrogen fuelled power plants in California(Green Car carnal knowledge2006). Bp is committed to developing other new project of bio fuel such as Algae, diesel engine and butanol (Good Clean Tech 2009). Bp differentiates itself from its rivals by new researches and developments, involving in new projects by creating and expanding energy products. Bp and Emerson Project direction increased the flow of piano tuner network technology by expanding its cherry point refinery application and put Emersons smart wireless throughout its RD facility in Naperville(Control global 2009). til now Bp imbibed marketing and refining strategy by processing crude oil to petroleum products and merchandising them around the world in over 100 countries operating in 17refineries worldwide at the capacity of 2,155million barrels per day, while its retail network consists of 22600 stations branded Bp, Amoco ,Arco, Castrol brand as part of its means of differentiating itself within the energy industry and a means of gaining competitive advantage(Bp2008 pg27-28). The company has set a standard with the use of cost leadership strategy, market strategy, differentiation strategy and a bit of focus strategy to maximize profit, generate revenue and having a competitive advantage in the energy industry.4.1 CONCLUSIONThis report has shown that British petroleum used cost leadership strategy which is also known as low cost strategy as a way of gaining competitive advantage which in turn had diverse effect on the business due to the explosions and positively impacted on the business. Also British petroleum has used differentiation strategy as part of its business strategy by differentiating its produ cts by creating and developing alternative energies to yield more proceeds for the business alongside and also incorporating marketing strategy by placing the business outlets in over 100 countries around the globe as a means of having an advantage of its rivals.5.0 RESOURCES AND CAPABILITIES OF BRITISH PETROLEUMThe Value chain are the activities through which it develops competitive advantage through its production, sales and marketing, maintenance, through the use of administrative infrastructure, gracious resource management and research and development in which put unitedly builds products and services(Johnson schools 2008).Primary activities A Companys primary activities are the processes involved in producing or manufacturing a product or products(Richard lynch 2006). Bp is well known for its cost reduction strategy, sales and marketing strategy, research and development strategy which are alternative energys and exploration and production of oil and gas and renewable energ ys, its innovation strategy which are the primary activities of British petroleum.Research and development after(prenominal) the major disaster British petroleum caused in the gulf of Mexico, and the ongoing debt it still has to pay, BP is still pushing further on its business by signing a deal with verenium for cellulosic ethanol technology which is a process of fermentation of biomass into ethanol which is one of British petroleum technology on bio fuel which is an alternative energy(C Net News 2010).Sales and Marketing scorn the huge loss in the Gulf of Mexico crisis early this year and the damage image of Bp, Bp is back in profit in relations to the increase in oil price which boosted its earnings in the exploration and production division to 1.3billion(BBC News by Peston Picks 2010). Bps exploration and development activities let in production of natural gas and oil and drilling of wells to complete production and such activities take place in UK, USA, Canada, Egypt, Azerbai jan, Trinidad and Tobago, Norway and many others while BPs refining and marketing section is involved in crude oil, petroleum products, petrochemical products and aluminium products by supplying these products to customers such as Amoco, Arco, Castrol brands and also producing alternative energies which are the primary activities of BP(Business Week 2010). TNK-BP produces natural gas in subsidiary areas in West Seberia and also in the core areas in West Seberia known as Nizhnevartovsk(TNK-BP2010). Bp sells its products through powerful brands such as ARCO, Castrol, Amoco, Aral and BP in more than 250,000 filling stations all over the world, Bp is also the largest retailer in petroleum products in Germany and has about 2,700outlets there. Bp is also cooking to build outlets in china which would be named Petro china and Sinopec(BP Investment and income2010). However BP has divested a number of its oil and natural gas properties which means selling off a part of its exploration and pr oduction infrastructure businesses and examples are BP sold four drilling rigs such as Magnolia, Merganser, Nansen, and Zia which produced a total of 15,000 barrels of oil per day which is as a result of exploring new energies in the vicinity and the cash from the sales all four drilling rig would be used to pay out of the violation charges of the gulf of Mxico oil spill(Guardian 2010).Supportive activities supportive activities are activities that support the primary activities that makes it more efficient and effective such as procurement, infrastructure, Human Resource Management and technology development(Johnson. G Scholes. K 2002). Bp new strategy of low cost is divestment of its telecommunication technology section of the business to Telekom system in other to save cost and continue its efficiency.CONCLUSIONThis report shows how British Petroleum has achieved its competitive advantage through its business strategies b cutting cost, innovating new products such as renewable e nergies, efficiently working on research and development and also utilizing its sales and marketing strategies. In the past five years has aligned its business strategy to resources and capabilities their by giving it competitive advantage. Bp has also faced a lot of challenges relating to the oil spill in 2005-2006 but has also gradually gained its stands in the oil and gas industry. However there are recent challenges due to the recent explosion in the gulf of Mxico causing Bp to lose its licence to extract oil and facing a six month suspense due to the explosion. 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